Planning a $100,000 Strategic Default

Posted by Madison on April 1, 2010

After reading the story of the Credit Terrorist and following the discussion on Would You Walk Away from Your Home? I realized we were sitting on a gold mine.

I checked the balances on our credit card arbitrage this morning and they’re currently just over $172,000. It occurred to me, that none of this credit is secured by anything (except our credit score).

I started thinking, what if I strategically default on these balances? I’ve always had a passion for extreme personal finance and it seems like everyone is getting bailed out these days, so maybe it’s time for me to take my share. Here’s my plan.

Strategic Default Plan

  • Default on my balances only. I’m planning only to default on the cards in my name, leaving Scott’s credit in great shape for when we need it (like insurance renewals). We purposely keep all of our cards separate to double up on offers and arbitrage opportunities.
  • Ignore the phone calls. Since we switched to Ooma and Google Voice, we’ll easily be able to forward calls from family and friends to our cell phones. The rest will just go directly to voice mail.
  • Not worry about wage garnishments. Since I work for myself, if they decide to garnish my wages, it’ll be entertaining that they still have to deal with me to accomplish that. Considering I decide what to pay myself, I think I’ll have some room to work here.
  • Sue for any violations. Following the Fair Credit Reporting Act and other consumer protection laws, I’ll position myself to make some extra money if the collectors violate any of the laws in trying to collect.

I’m planning to leave my PenFed credit card in tact, since we have our mortgage with them, and I don’t want to rock the boat. I’m also planning to leave our local credit union out of it, since we have a fantastic Heloc and all of our business accounts with them.

So after subtracting those accounts, and the cards under Scott’s name, I end up with just over $100,000. I’ll report the progress here.

I signed up for My Fico, to monitor the impact to my credit score and reports. We’ll see how long it really takes to bounce back from something like this.

What do you think? Will the plan work? What am I missing?

Update: Happy April Fools’ Day! Don’t worry readers, of course I’m not going to default on anything! Here’s the whole update: Happy April Fools’ Day! Gotcha Again!

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Comments to Planning a $100,000 Strategic Default

  1. Let me be the first to say April’s Fool!!!

    I DOUBT you would ever do such a thing. Good one though 🙂

    Ifi

    Ifi

  2. Haha – you rock.

    The sad thing is – this actually sounds like a good plan! 🙂

    Mike 4P

  3. Hopefully that’s an April Fool’s joke…but agree with Mike it would be an interesting experiment.

    Jenny

  4. I’ll reserve judgment until I hear what you’re going to do with the money …

    Ron

  5. This is not a particularly amusing April Fool’s Joke.
    I never understood people who thought that ripping off companies was amusing. The Credit Card Companies (in this case) are not going to get ripped off and they are not going to pay out of their own pockets if you sue them. The rest of us honest people are going to be ripped off by paying higher prices and higher interest rates.
    And BTW, the same is true of taxes. When taxes are raised on Businesses, mythical Mr. Money Bags is not going to reach into his pockets and pay the increased taxes, he is going to pass them on to you and me in the form of higher prices.
    Like it or not, we are all in this together.

    Rory

  6. I always enjoy reading your blog. Thanks for your dedication.

    Is sarcasm another service you offer?
    Good heavens.. don’t provide anyone new ideas of how to hurt your bank AND Please don’t post about how you’ll “take out” the banker who will come after his money. Might be a good CSI spoof… Haha

    However, as a banker, I would appreciate reading a post of how a customer would plan to default on us…I give you a 10 for creativity.

    … people are against the bailout money,etc.. UNLESS they can line their pockets and benefit too..

    Jaythebanker

  7. Wow! You got me. I initially thought about cancelling my subscription to your email stream. I thought to myself – is she STEALING $100k?? April Fools!!

    jacquie

  8. Even if you are not taking Scotts credit cards into affect what about the marital law Wisconsin has. Won’t they garnish Scotts wages?

    Dawn Holmes

  9. Yeah April Fool’s, but still….hmm.

    PK

  10. I think it’s a pretty good April Fools, but the key you are missing is that it’s Fraud.

    Traciatim

    • I did something like what she describes, it’s not fraud. Why is it morally wrong for a person to make a logical monetary decision but not for a bank? When I was sued I fought banks in court and won because they violated the law when they tried to collect. Most of you are a slaves to the banks. Guess the joke is on you.

      Joe

  11. I was totally going to put in a comment questioning your judgment (and possibly moral character) until I saw the other comments and realized I’d been had. Happy April Fool’s Day!

    Mark

  12. I’m so glad I jumped to your site today to comment. I know you play April Fools jokes on us each year and yet I was caught on this one! Good Job!

    I was already to rant about lack of responsibility and accountability being a huge part of the problem with our economy today.

    Thanks for reminding me to not believe everything I read on the ‘net.

    Stephanie

  13. Sarcasm aside, the plan would make your life a living hell. Not sure what state your in, the companies could go after your assets, your credit score would be ruined and for 100,000 grand you would probably be sued.
    You’ve posted this article to make a point. The point is that our system is largely based on trust. Trust goes both ways and people have lost trust in the financial industry. As someone who has always lived within his means, when i buy a house i will get it appraised. On that appraisal i will get a mortgage. If the house value falls 50% because of devious practices the same bank that gave me my mortgage was involved in then I don’t think I’d have a problem defaulting. That to me is morally different than what you stated above. While there are scumbags out there that would do what you mentioned above, I’m inclined to think that most homeowner are not scumbags.

    Al

  14. April fool’s…you got me last year…I was ready this year.

    kristia@familybalancesheet

  15. I think putting up a blog post about what you would actually do, would probably not bode well in court.

    Howard

  16. Hopefully this is an April Fools thing. A moral conscious is what you would be missing if you are serious. How is that Ooma thing working for you?

    Joe Ertl

    • We love the Ooma! Turned out to be great service and you can’t beat the price. Are you thinking of getting one?

      Madison

  17. Happy April Fools’ Day to all of you! Here’s the official update for those of you who were still wondering if I was joking: https://www.mydollarplan.com/happy-april-fools-day-gotcha-again/

    Madison

  18. How can you possibly have such a high credit limit on credit cards? I’ve got 3 cards and my limit on all 3 barely is above $20k and I have perfect credit, never missed a payment, and pay everything off in full.

    Mike

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