What is a Debt Default?

A default is when a debtor is unable or unwilling to establish repayment on a given debt obligation. After continuous non-payment a consumer is typically considered to be in default after a 90-day period of delinquency. However, different debts charge off at different time periods and some might consider a default to occur sometimes before or after the 90-day delinquent time period. This is a matter of definition since technically speaking different creditors may have different guidelines.

Late Payments

In order to go into a default on a particular given debt obligation you would first need to have missed your due dates and have been recorded for late payments. After you’ve missed enough payments you are considered to have defaulted on your debt. Missing payments and defaulting on debt obligations go hand in hand.

Debt Priority

If your find yourself in a situation where you are forced to pick which debts to pay and not pay you should consider always prioritizing repayment of secured debts first. Mortgages, auto loans, HELOCs, etc., should always take priority over unsecured debts like credit cards, personal loans, etc. The reason is that if you default on an unsecured loan you don’t have property that can be seized, repossessed or forfeited. While if you default on an auto loan you can potentially have your car repossessed and if you default on a mortgage you could eventually have your home taken away.

What is a Strategic Default?

A Strategic default is where you are defaulting on purpose in order to save money and renegotiate better terms on your debt obligations. This is usually ill-advised with secured loans since property will be seized in these scenarios and there is a lot less leverage in terms of negotiations. However strategic defaults on secured debts can still be done with options like a mortgage modification, etc.

What is the Best Way to Resolve Your Situation If You’re in a Debt Default?

If you’ve defaulted on your debt you should highly consider undergoing a debt settlement process using a strategic default method. Whether you opt to go about it of your own accord or to hire a debt relief company remains entirely up to you. However, it’s an opportunity to resolve debts you owe for less than the full balance. You can use the negative situation and turn it into a positive by saving money on your debts.