We’ve had a few new potential clients who’ve contacted us recently, wanting to talk about “strategic default.”
Strategic default is the term used to describe a property owner’s decision to stop making mortgage payments and otherwise default on his or her obligations to the lender, despite having the ability to afford it.
In our law practice, it is rare to meet and work with clients who have strategically defaulted, or intend to strategically default. Instead, the vast majority of people we see have no means to pay their mortgage. They are in default, despite all of their best efforts to continue to meet their obligations; they simply cannot pay.
For the rare person who intends to strategically default, it must be clear that there are consequences to this decision. Simply put, a borrower can choose to walk away from a mortgage obligation, but for most North Carolina residents, the mortgage company can and will follow the borrower to recoup any deficiency. (North Carolina is a non-recourse state, but the exceptions swallow up the rule such that we rarely see a true non-recourse loan.) Borrowers considering defaulting on a mortgage should understand that the mortgage company will almost always foreclose on a property, leaving a deficiency that they can legally ask the borrower to pay.
Contact a qualified, experienced bankruptcy attorney to discuss how these laws apply may to you, and then weigh your options carefully.