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I'm sure you're getting downvoted because people think this is immoral, but this is absolutely the smart move. Rich people and corporations have done a great jo
by caymanjim 7y ago
I'm sure you're getting downvoted because people think this is immoral, but this is absolutely the smart move. Rich people and corporations have done a great job leveraging the natural tendency of people to feel guilty about abandoning their debt obligations, but rich people and corporations do this constantly as a matter of course.
If you're ever deep in over your head financially, the smartest thing to do is to walk away. A mere year or two after filing bankruptcy, you can easily repair your credit to the point that you can get a mortgage or auto loan at a reasonable rate. Within seven years, bankruptcy or not, abandoned debt is off your credit history. Why suffer for a decade treading water paying down interest and penalties with no hope of ever getting rid of the principal if you can just hit reset?
I'm not saying it's right to rack up enormous debt on purpose and walk away when you have the means to pay, but people literally kill themselves from stress and suicide when they can just stop paying. If you tried to do the right thing and through no fault of your own (illness, injury, massive global disruption in the economy) you find yourself in an insurmountable position, don't feel bad. Just say no.
- Consultant32452 7y agoThe way I see it the buyer and the bank made a bet on the value of the house and the buyer's ability to pay. Sometimes bets don't pan out. We're trained to be emotional about it, but the bank certainly isn't. To them it's "just business" when they foreclose on a struggling family. Similarly, it should be "just business" if you bail on bad debt.
- jacurtis 7y agoI actually really like that analogy. I can't tell you how many times I have seen comments on Personal Finance subreddit and other places that always criticize banks for being ready to foreclose on a home with no concern for the people that live there. Of course they do, you are just a blip on the bank's radar. The decision to foreclose is a matter of business to them. So why can't borrowers do the same thing and essentially "foreclose" on the bank? Foreclosure is literally just cutting your losses. That's what the banks do all the time, so if they can do it, then why can't borrowers do it too? It is an excellent perspective.
- rhexs 7y agoDoes the bank not come after individuals years later for owed debt via lawsuit? If not, walking away seems like a good idea.
- Consultant32452 7y agoYour asset (home) is sold, and you owe the difference. The bankruptcy court decides a payment plan for you to pay back that difference. Usually you pay back pennies on the dollar. Sometimes you walk away clean.
- sagarm 7y agoIf you have a non-recourse mortgage, the bank is entitled only to the collateral (the house). Several states allow only non-recourse mortgages. https://www.quickenloans.com/learn/the-difference-between-recourse-and-nonrecourse-loans https://www.quickenloans.com/learn/the-difference-between-re...
- elliekelly 7y agoWhen PE firms employ this strategy at the expense of individual retirement accounts everyone accepts that they “had no choice” but an individual who even dares consider the same is branded a scofflaw.