Joyce
“Dear Steve,
Retired from 5/3 Bank in 2003 I was offered a loan to purchase my Stock Options. These options were at $40.+ and $50.+ per share. I have a loan for $36,300 at prime with quarterly interest with no maturity date. The stock price now is around $2.00 per share. The collateral for this loan is the stock.
What happens if I default on this loan?
Joyce”
The Answer:
Dear Joyce,
I don’t know specifically but I can see it being anything good. Besides some possible tax consequences and personal pursuit for the debt, I’ve seen very few situations where someone was able to walk away with no repercussion.
Before you do anything I would advise you to check with a lawyer licensed in your state for specific advice about what your legal liability for this loan is beyond the collateral.
Additionally, I think you need to speak to a tax adviser and ask if there is a taxable event to you as the result of not paying back this loan. If it is viewed as forgiven debt you could owe income tax on the loan amount and that’s not something to sneeze at.
