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.


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?

Do You Have a Question You'd Like Help With? Contact Debt Coach Damon Day. Click here to reach Damon.

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.

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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.

Damon Day - Pro Debt Coach

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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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