“Strategic” Default Question

[Coronita]

[quote=Cube]If the hypothetical goal here is to have person A effectively buy person X a house, why ever foreclose or forgive the loan? Why not just have person X be in default to person A indefinitely? In fact, why not have person X pay the interest-only amount to person A (while falling in arrears on the full payment) and write of the payments against taxable income? And person A can probably gift most / all of that money back to person X (assuming spouses for each are playing too).[/quote]

I’m more interested in what happens before a distribution of an estate which includes the loan. It would do no good if the beneficiary loan that also owes the debt.

[UCGal]

My first thought when I read this is
* I need to get a better/nicer/richer class of relatives or friends… 😉 The one big loan I took from my parents I had to pay back with fully amortizing interest and the grief/shame of missing a payment was worse than any collection agency… Bank of Dad was harsh!

* the second thought was that it was an estate planning tool. (Like Brian suggested and SDR slammed him for.)

* then I see flu was thinking the same thing.

[UCGal]

My first thought when I read this is
* I need to get a better/nicer/richer class of relatives or friends… 😉 The one big loan I took from my parents I had to pay back with fully amortizing interest and the grief/shame of missing a payment was worse than any collection agency… Bank of Dad was harsh!

* the second thought was that it was an estate planning tool. (Like Brian suggested and SDR slammed him for.)

* then I see flu was thinking the same thing.

[UCGal]

My first thought when I read this is
* I need to get a better/nicer/richer class of relatives or friends… 😉 The one big loan I took from my parents I had to pay back with fully amortizing interest and the grief/shame of missing a payment was worse than any collection agency… Bank of Dad was harsh!

* the second thought was that it was an estate planning tool. (Like Brian suggested and SDR slammed him for.)

* then I see flu was thinking the same thing.

[UCGal]

My first thought when I read this is
* I need to get a better/nicer/richer class of relatives or friends… 😉 The one big loan I took from my parents I had to pay back with fully amortizing interest and the grief/shame of missing a payment was worse than any collection agency… Bank of Dad was harsh!

* the second thought was that it was an estate planning tool. (Like Brian suggested and SDR slammed him for.)

* then I see flu was thinking the same thing.

[UCGal]

My first thought when I read this is
* I need to get a better/nicer/richer class of relatives or friends… 😉 The one big loan I took from my parents I had to pay back with fully amortizing interest and the grief/shame of missing a payment was worse than any collection agency… Bank of Dad was harsh!

* the second thought was that it was an estate planning tool. (Like Brian suggested and SDR slammed him for.)

* then I see flu was thinking the same thing.

[Coronita]

[quote=UCGal]My first thought when I read this is
* I need to get a better/nicer/richer class of relatives or friends… 😉 The one big loan I took from my parents I had to pay back with fully amortizing interest and the grief/shame of missing a payment was worse than any collection agency… Bank of Dad was harsh!

* the second thought was that it was an estate planning tool. (Like Brian suggested and SDR slammed him for.)

* then I see flu was thinking the same thing.[/quote]

Well, I was just asking because I don’t understand the intricate details of collecting on a debt (haven’t not been in trouble with debt myself).

I guess my followup question would be

1)If said person just defaults, can the creditor go through the motions of forgiving this loan while at the same time opting out of wrecking the person’s credit at the same time?

2)And the rules around loan forgiveness in lieu of the current climate, I’m wondering if they are drastically different now versus before in which loan forgiveness was a taxable event.

Maybe I’m not being clear enough, but I was wondering if someone would shed some light where I’m going with this….

And the basis for this was….

http://www.irs.gov/individuals/article/0,,id=179414,00.html

Specifically:
“This provision applies to debt forgiven in calendar years 2007 through 2012. Up to $2 million of forgiven debt is eligible for this exclusion ($1 million if married filing separately). The exclusion does not apply if the discharge is due to services performed for the lender or any other reason not directly related to a decline in the home’s value or the taxpayer’s financial condition.
“

[Coronita]

[quote=UCGal]My first thought when I read this is
* I need to get a better/nicer/richer class of relatives or friends… 😉 The one big loan I took from my parents I had to pay back with fully amortizing interest and the grief/shame of missing a payment was worse than any collection agency… Bank of Dad was harsh!

* the second thought was that it was an estate planning tool. (Like Brian suggested and SDR slammed him for.)

* then I see flu was thinking the same thing.[/quote]

Well, I was just asking because I don’t understand the intricate details of collecting on a debt (haven’t not been in trouble with debt myself).

I guess my followup question would be

1)If said person just defaults, can the creditor go through the motions of forgiving this loan while at the same time opting out of wrecking the person’s credit at the same time?

2)And the rules around loan forgiveness in lieu of the current climate, I’m wondering if they are drastically different now versus before in which loan forgiveness was a taxable event.

Maybe I’m not being clear enough, but I was wondering if someone would shed some light where I’m going with this….

And the basis for this was….

http://www.irs.gov/individuals/article/0,,id=179414,00.html

Specifically:
“This provision applies to debt forgiven in calendar years 2007 through 2012. Up to $2 million of forgiven debt is eligible for this exclusion ($1 million if married filing separately). The exclusion does not apply if the discharge is due to services performed for the lender or any other reason not directly related to a decline in the home’s value or the taxpayer’s financial condition.
“

[Coronita]

[quote=UCGal]My first thought when I read this is
* I need to get a better/nicer/richer class of relatives or friends… 😉 The one big loan I took from my parents I had to pay back with fully amortizing interest and the grief/shame of missing a payment was worse than any collection agency… Bank of Dad was harsh!

* the second thought was that it was an estate planning tool. (Like Brian suggested and SDR slammed him for.)

* then I see flu was thinking the same thing.[/quote]

Well, I was just asking because I don’t understand the intricate details of collecting on a debt (haven’t not been in trouble with debt myself).

I guess my followup question would be

1)If said person just defaults, can the creditor go through the motions of forgiving this loan while at the same time opting out of wrecking the person’s credit at the same time?

2)And the rules around loan forgiveness in lieu of the current climate, I’m wondering if they are drastically different now versus before in which loan forgiveness was a taxable event.

Maybe I’m not being clear enough, but I was wondering if someone would shed some light where I’m going with this….

And the basis for this was….

http://www.irs.gov/individuals/article/0,,id=179414,00.html

Specifically:
“This provision applies to debt forgiven in calendar years 2007 through 2012. Up to $2 million of forgiven debt is eligible for this exclusion ($1 million if married filing separately). The exclusion does not apply if the discharge is due to services performed for the lender or any other reason not directly related to a decline in the home’s value or the taxpayer’s financial condition.
“

[Coronita]

[quote=UCGal]My first thought when I read this is
* I need to get a better/nicer/richer class of relatives or friends… 😉 The one big loan I took from my parents I had to pay back with fully amortizing interest and the grief/shame of missing a payment was worse than any collection agency… Bank of Dad was harsh!

* the second thought was that it was an estate planning tool. (Like Brian suggested and SDR slammed him for.)

* then I see flu was thinking the same thing.[/quote]

Well, I was just asking because I don’t understand the intricate details of collecting on a debt (haven’t not been in trouble with debt myself).

I guess my followup question would be

1)If said person just defaults, can the creditor go through the motions of forgiving this loan while at the same time opting out of wrecking the person’s credit at the same time?

2)And the rules around loan forgiveness in lieu of the current climate, I’m wondering if they are drastically different now versus before in which loan forgiveness was a taxable event.

Maybe I’m not being clear enough, but I was wondering if someone would shed some light where I’m going with this….

And the basis for this was….

http://www.irs.gov/individuals/article/0,,id=179414,00.html

Specifically:
“This provision applies to debt forgiven in calendar years 2007 through 2012. Up to $2 million of forgiven debt is eligible for this exclusion ($1 million if married filing separately). The exclusion does not apply if the discharge is due to services performed for the lender or any other reason not directly related to a decline in the home’s value or the taxpayer’s financial condition.
“

[Coronita]

[quote=UCGal]My first thought when I read this is
* I need to get a better/nicer/richer class of relatives or friends… 😉 The one big loan I took from my parents I had to pay back with fully amortizing interest and the grief/shame of missing a payment was worse than any collection agency… Bank of Dad was harsh!

* the second thought was that it was an estate planning tool. (Like Brian suggested and SDR slammed him for.)

* then I see flu was thinking the same thing.[/quote]

Well, I was just asking because I don’t understand the intricate details of collecting on a debt (haven’t not been in trouble with debt myself).

I guess my followup question would be

1)If said person just defaults, can the creditor go through the motions of forgiving this loan while at the same time opting out of wrecking the person’s credit at the same time?

2)And the rules around loan forgiveness in lieu of the current climate, I’m wondering if they are drastically different now versus before in which loan forgiveness was a taxable event.

Maybe I’m not being clear enough, but I was wondering if someone would shed some light where I’m going with this….

And the basis for this was….

http://www.irs.gov/individuals/article/0,,id=179414,00.html

Specifically:
“This provision applies to debt forgiven in calendar years 2007 through 2012. Up to $2 million of forgiven debt is eligible for this exclusion ($1 million if married filing separately). The exclusion does not apply if the discharge is due to services performed for the lender or any other reason not directly related to a decline in the home’s value or the taxpayer’s financial condition.
“

[SD Realtor]

FLU, HLS is pretty adept at some of those rules, you may wanna pm him on it.

[SD Realtor]

FLU, HLS is pretty adept at some of those rules, you may wanna pm him on it.

[SD Realtor]

FLU, HLS is pretty adept at some of those rules, you may wanna pm him on it.

[SD Realtor]

FLU, HLS is pretty adept at some of those rules, you may wanna pm him on it.

[Author]

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