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What Happens if I Default on My Stock Options Loan? – Joyce

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”

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.

Sincerly,
Steve

You are not alone. I'm here to help. There is no need to suffer in silence. We can get through this. Tomorrow can be better than today. Don't give up.


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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.

2 Comments

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