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Planning a $100,000 Strategic Default

After reading the story of the Credit Terrorist [1] and following the discussion on Would You Walk Away from Your Home? [2] I realized we were sitting on a gold mine.

I checked the balances on our credit card arbitrage [3] 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 [4]).

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 [5]). 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 [6] and Google Voice [7], 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 [8] 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 [9], 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! [10]


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