Video Script Below
I’m Steve Kramer. I’m a Florida foreclosure attorney and the question is should I do a strategic default? I’m upside down in my house; I owe way more than it’s worth. Should I go ahead and stop paying so I can try to get out of this thing? What is a strategic default? That’s exactly what it is; you owe more than the house is worth. You’re looking down the road and it doesn’t look a whole lot better. And the question is are you prepared to deal with the potential consequences, as well as the potential benefits? And let’s talk are the consequences first. And those are you credit is going to take a hit. If you stop paying on your house, your credit is definitely going to take a hit. It’s going to go down. If you go ahead and default on the house, you may get sued. And if you do get sued, you might have a judgment entered against you and that’s something that you’ve got to be aware of. And third, there’s going to be some stress because you’ve got some uncertainty and you’ve got some potential consequences and that’s some emotional stress that you’re going to have to deal with. And if you’re not prepared to deal with those consequences, then it probably isn’t a good idea to be looking at a strategic default. On the other hand, if you do a strategic default well - if you’re upside down in your house and the situation doesn’t look good, which is a lot of people who are watching this video – then a strategic default can be the best economic decision that you make. Some of the benefits are once you stop paying you’re still going to be in your house. And if you defend your foreclosure – if you get served a foreclosure – you’re going to continue to stay in your house and you’re going to get time. And that’s time where your cash flow is going to improve. That money that you were paying in the mortgage now is going into savings, getting set aside, or in some circumstances getting spent, and it depends on how tight the budget is but that happens too. The important thing is that if you’re able to set aside some money to deal with the bank later, you may never have to pay them a dime. But if you do, if you do have to pay them some money or if you do have to enter in some type of agreement were you pay them, then you’ll have it set aside already. And if not, that’s great you can have a fantastic weekend, great day, great vacation, whatever. You’ve got money that you wouldn’t have had otherwise. The final benefit of a strategic default is that you get an opportunity to negotiate with creditors. If you’ve got 2 mortgages and you’re current on your first mortgage, well second mortgage isn’t likely to be that negotiable or work with you. If you’re in default on the first mortgage and your house gets sold at auction, well second mortgage probably isn’t going to get anything. And that means they’ve got some real incentive to negotiate with you if that looks like that’s going to happen. So, it can be very useful to do a strategic default if you’ve got other creditors to deal with. Also, let’s say you’ve got a lot of credit card debt and you don’t want to fail a bankruptcy where you liquidate everything or do a bankruptcy where you do repayment plan. Maybe you wanted to negotiate yourself and try to avoid a bankruptcy, period. Well, the money that you gain from the cash flow you might be able to settle up with all of your creditors. You may wind up in a much better position, but the thing you want to look at is you need to be sure that you’re willing to take the risk and if you’re a risk-adverse person, it may not be the right thing for you. There are a lot of attorneys and a lot of people are pushing strategic default, I don’t endorse that. I think it’s unique to every person. And when you’re ready, we can sit down. We can look at your individual situation; we can see what your assets are like. We can see if we need to do a little bit of asset protection to see that you’re protected in the future. We can take a snapshot of what’s going on and get you good advice and figure out what the right next step for you is. So, if you have any questions I deal with this all the time. Call me at the number below. I’d be glad to talk with you. Thanks for watching the video. I’m Steve Kramer.
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