No recourse

Okay, so I should have know this from the gitgo, but I only recently learned that most mortgages in America are no recourse loans, which means they can seize the house, but that’s it; they can’t get your 401(k), your savings, your cars or anything else. This changes the advice I’d given before, and in a pretty serious way. The assclowns of conventional wisdom still act as if a credit score was somehow important. A credit score, as stated here before is a marketing gimmick some hack made up to make you think debt was good and even necessary. Cash is king and a good credit score plus $3 will get you a latte at Starbucks.

Given that your mortgage is no recourse, and given you are upside down on your loan, simply stop paying the mortgage. It will take them a year, maybe longer, to get you out of the house. When I went bankrupt in 1992, it took 11 ½ months to get us out. If I’d had a salary while running my first startup, think of how much cash I could have saved up!

So you stop paying the mortgage, get to live in the house free for a year, and have the discipline to use the extra cash to pay off all debt and actually put some away. Where does that leave you? Finding a nice place to rent, preferably walking distance from work, putting away savings and living a simpler life. And remember, rent is not just throwing money away if real estate prices are going down. It’s just common sense.