Which Debt Should I Default On First?
The best approach to defaulting on debts.
Reader Melissa D. asks:
I lost my job in November and had to stop paying for my house, but all my other accounts are current. I'm okay with letting my home go because I owe substantially more than it's worth. If I have no choice, is it better to default on my second largest debt each month, which is a line of credit with a $577 minimum payment, or on several smaller accounts?
Answer: The best approach is to contact each of your creditors and ask to speak to their accounts receivable manager or in-house debt adviser and let them know your situation.
Be polite but firm. Let them know you are looking for work, but won't be able to make all your debt payments for some time.
Be clear that you are in the process of choosing which debts to pay and which to default on. If they understand that you won't be sending them any money unless they make concessions, you may be surprised at what they're willing to offer.
Ask for solutions such as:
- a temporary suspension of payments
- a mortgage loan modification
- a mortgage short sale
- reduced payments
You typically have to pay for your credit score--but in the kit, I tell you about my favorite place to get your credit score free, with no strings attached.
Image courtesy of Shutterstock