Letter Re: Personal Debt Implications of an Economic Collapse

Jim,
Just a pondering I hoped you might be able to give me some insight on, I’m either to young or didn’t know it because we were too poor to notice, but I’ve never experienced a significant economic decline in my life.  My wife and I are both doctors and have borrowed heavily to set ourselves in a great place.  Right now we have no difficulty making the bill payments but should the banking/finance system collapse, will we still have to pay the bills; how do we pay the bills; and/or is there any hedge to anticipate how we’ll make those payments?  I don’t doubt that we’ll still make ‘something’, be it cash or barter, but what exactly do the banks expect from you at that point?  Do they just foreclose on everyone…?  Is there something we should be doing now asset wise if the US dollar were to collapse we could still meet our loan requirements…?  I’m just not quite sure what would be necessary.  Most of the articles/publications I read take you all the way to that point but fail to point blank say how you keep those things that someone else has a lien on, even if you have a currency collapse.  Thanks for the thoughts and all the insight.  SurvivalBlog.com is my home page. – E.A.

JWR Replies: In essence, if we go though a deflationary depression, creditors will be chasing their clients, but if we go though a inflationary depression creditors will practically be hiding from their clients, saying: “Oh, just keep on making your monthly payments.”

In a total collapse, all bets are off. If it is hyperinflationary, you can simply pay off your creditors in depreciated dollars.  And I would advise doing so in the midst of it all, before a major currency reform.  Just be sure to get a notarized “satisfaction of mortgage” document (or similar), so that you can prove that you stand free and clear.

In the end, possession in nine tenths of the law.  The many people now squatting in foreclosed houses are evidence of that.