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I Looked Into Living Free and Clear and I’m Confused. – James

“Dear Steve,

My wife and i owe about $20,000. credit cards debt. We have adjustable mortgage that we owe more than the house is worth. We bought the house for $280.000. We owed more than $320,000. The current market value is about $160,000. We would like to pay off our debts sooner. I looked into “Living Free And Clear ” and really confused on what to do. Please give us advise and get rid of this debts!
Thank you. God Bless.

James”

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The Answer

Dear James,

You’ve got a house that is way underwater and some credit card debt. You don’t need any expensive program to help you to deal with that situation.

The way you dig out of a hole like that and to get out of debt sooner without negatively hurting your credit is to pay more than you owe every month until the debt is extinguished. There, I just saved you a bunch of money.

But can you or do you want to pay back $320,000+ on a house that is worth $160,000? Can you afford to do that and at what cost to your future?

I agree that we have an obligation to meet our promises but are you willing to sacrifice your future financial health just to do that?

What I mean is that it might just be that it makes better financial sense for you to walk away from your current home, discharge all of your debt, and get a fresh start than any “debt reduction” plan.

At what point do you need to do what is best for you as a couple over what is best for the lender? What would the lender do if they were in your shoes?

The idea of handing back the house is a strategy called a strategic default. It will slam your credit, the lender will foreclose and you will need to follow it all up with a bankruptcy. But once you file bankruptcy and discharge your debt you can get a second chance and a fresh start. You can even rebuild your credit quickly.

Before we can decide if “Living Free and Clear” is for you, I need for you to get clear on what the goal is you are trying to achieve. Is the goal that you need to address the debt and move ahead in a better way or that you just want to continue your regular payment plus a bit extra each month to pay off your current debts sooner.

Please post your responses and follow-up messages to me on this in the comments section below.

Big Hug!

I Looked Into Living Free and Clear and Im Confused.   James
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I Looked Into Living Free and Clear and I'm Confused. - James by

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About Steve Rhode

Steve Rhode
Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.

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