The Ramsey Show - App - My House Is Being Foreclosed On (Hour 1)

Episode Date: August 23, 2022

Dave Ramsey & Dr. John Delony discuss: What to do when your house is being foreclosed on, Dealing with liens on property, How long to live with your parents, Whether or not suit settlement money is considered taxable.   Want a plan for your money? Find out where to start: https://bit.ly/3nInETX Listen to all The Ramsey Network podcasts: https://bit.ly/3GxiXm6

Live from the headquarters of Ramsey Solutions, it's the Ramsey Show, where debt is dumb, cash is king, and the paid-off home mortgage has taken the place of the BMW as the status symbol of choice. We help people build wealth, do work they love, and create actual amazing relationships. You jump in, we'll help you with your life and your money. Dr. John Deloney, number one best-selling author and host of the wildly popular Ramsey Network production of The Dr. John Deloney Show. Where he talks about all kinds of mental wellness issues is my co-host today. You jump in, we'll talk about your life and your money 888-825-5225 charles is going to start off this hour in portland oregon hey charles how are you

hi i'm dave i'm fine um the kind of question i have is a little bit unusual in that last year my wife passed away. I'm sorry. And we were doing the baby steps, but that kind of came to a stop because without her income, my only income is Social Security, and I'm trying to figure out a way to save, keep our house from going into foreclosure. Wow. I'm sorry. How long were you guys married? 18 years. Wow. How old are you? 64. How old was she? She passed away. She was just turned 50. Whoa. What happened?

We were on our way home from a dinner date and I had met her after work, so we were in separate cars. And I exited the freeway where I live, and she was about two minutes behind me, and she got caught in a landslide. Whoa. No way. Wow. That's wild. Man, I'm sorry. What a deal.

Yeah. And I'm actually in Nashville right now. I took a picture with you yesterday. Oh, okay. Okay. My daughter is the one going to college here. Oh, yeah. I remember talking to you.

Yeah. Yeah. I'm sorry. Yeah. Talking about dad's checking into Belmont. Yeah. Yeah. Um, what do you owe on the house?

Um, right at three 20. And what's the payment? Um, just about 2000. Okay. And what is your social security? Um, social security is about 1600. Okay. And are you behind on the house?

No, we're up to date right now. How? I've been using money from savings that I got from the life insurance to keep the house payment up. Got it. How much was the life insurance? Well, it got split three ways because me and the kids were all on it. How much was the life insurance? Well, it got split three ways because we had me and the kids were all on it. So the life insurance company gave 35 to each of the kid and 30 to me of the percentage. So I ended up with about $170,000.

But when she passed away, to get all the bills squared away and get us out of debt, I had to pay off my car and my daughter's car. So I spent about a hundred thousand getting us debt free, except for the house. Your daughter's using her money to go to Belmont. What's that? Your daughter's using her money to go to Belmont. Well, yes and no. She got a bunch of scholarships. She had good grades. She got scholarships and stuff. And so our total bill for Belmont was just over $3,000.

Oh, nothing. Fantastic. That's wonderful. What's the house worth? What's it worth? According to online, it would be worth probably a little over $5,000, but the online description of it is incorrect. They have it as a three-bedroom, and it's really a four-bedroom.

Yeah, so somewhat. But, you know, you've got $400,000 equity anyway. Yeah. Okay. What is it about staying in this home that's important to you? Well, it's the only kids in that house, the kids I've ever known. But if I were to sell it, housing in the Portland area, I would not be able to get into another house

at the payment I'm making. And what I'm asking you is you're on Social Security now, so that tells me that you're untethered. What is it about Portland? I hear a guy who's got a hole in the boat and he's determined to stay in the bay that he's in, even if that means the whole thing sinks. Yeah, well, I still have my son who's in

high school great your son's going to want to stay in a home right so let me let me um so let's first establish this okay you i've been talking to you for a few minutes you've been through a horrible tragedy and it breaks your heart and it clouds and fogs your mind if you're a normal human, and you're a normal human. But you're a smart guy. So let's first establish, A, there's not going to be a foreclosure. That's not going to happen because you would sell the house before you would lose all of that equity unless you're a fool, right? Yeah. that equity unless you're a fool right yeah okay so you're either going to get your income going and pay the bill or you're going to sell it right but there's not going to be a foreclosure you're

going to sell it to avoid a foreclosure because you can't afford it now i'm 62 you're 64 i work every day why don't you i've been on um i had two bouts with cancer and i still have ongoing medical issues with that that's why i had to take an early retirement from where i was working what were you doing airlines what at the end of the earlier uh what's that you were a pilot no no uh no, aircraft mechanic. Okay, all right. So I'm going to start asking myself, if I'm you, what I can do with my medical limitations to create $5,000 a month. And if I can't find that, then you need to sell your house.

Yeah, I was looking into that. But in the area, if I sell the house, the apartment rents are higher than what my mortgage payment is. You're going to lose the house if you don't pay the payment or sell it. Right. So there's no magic wand that gets you out of this because rents are high in Portland, Oregon. So you are either going to create $5,000 worth of income to be able to pay the bill on a $2,000 house payment.

And you can do, you know, I'm not panicking, but you've got to start thinking that this is a math problem and I've got to take action. What happens too many times when someone's gone through a tragedy like you've gone through, and then they get pinched in a situation like this, a lot of people tend to get paralysis and do nothing, and then they wait until it's too late, and they do lose the house. So I'm telling you, you need to to actively proactively decide in the middle of your grief which is very hard to do in the middle of your broken heart which is very hard to do what the next chapter of your career looks like and you're therefore your housing and so you you've got to go make some money now you don't have to go to work for somebody nine

to five in corporate america Maybe you can't do that. Maybe there's a side hustle. Maybe there's a thing you do from home from the computer. I don't know what that thing is. I will send you Ken Coleman's book from Paycheck to Purpose to help you get through that. But it's a simple procedure, Charles. As badly as I hurt with you, I'm also not going to participate in watching the boat sink. So either fix the boat or sell the boat.

Don't sink the boat. And it's important to remember, your wife is no longer in that boat. She's gone. I think, Dave, I think it's time to let the house go, man. You think it's better to let it go? Yeah. Okay. This is The Ramsey Show. Dave, I think it's time to let the house go, man. You think it's better to let it go? Yeah. Okay.

This is The Ramsey Show. open phones at 888-825-5225 number one best-selling author, Ramsey personality, Dr. John Deloney, is my co-host today. Open phones here. I'm hitting the wrong buttons. Let's see if I can get the right one. There it is. Brian's with us in Dayton. Hey, Brian, how are you? I'm doing great.

How are you guys? Better than we deserve. What's up? I've got a real estate question for you that I've never encountered before. My wife and I purchased a property in January for $73,000 just as an investment property. We paid cash for the property. And then on August 9th, I got a letter from the state saying that they had put a $207,000 lien on the property for Medicaid recovery because the previous owner had been on Medicaid. And I didn't know if you'd ever encountered anything like that

or had any advice on how to deal with that. Did you buy title insurance? We do have title insurance, and I did file a claim last week. They assigned a lawyer to it, but they haven't really gotten back to me. Was the lien filed by the state prior to the closing of the property? No, the lien was filed on March 10th, so two months after we purchased it. Well, again, you got in touch with the title company, but I don't think the state has the power to retroactively lien something.

I mean, why can they not put a lien on your property 15 years later? Here's the thing. Who owned the house at the time the lien was placed? The guy that they're placing the lien on didn't own the house anymore. So the only thing the state can do is try to find the $70,000 he got from the sale of the property. The state has no right to place a lien on your property. Well, that's exactly what I thought. But then I called the attorney who sent the letter, and he said the state has a year to file the lien.

I said, well, a state doesn't even own the property anymore, so how can they file a lien on me? I guess that's kind of where we're at. Yeah, they can't go back and get stuff that the guy used to have. Yeah. Right. I've never heard of this. I emailed the attorney general's office. They said they'd look into it.

I emailed my state representative. I contacted everyone. I don't think you're in. Number one, if there is a legitimate lien that can be done, and I don't think it is, okay? I bought 2,000 pieces of real estate. I bought stuff, and then the title turned up bad. I bought a house one time, and the title company neglected to figure out

that there was a brother with the two sisters that were selling it and it was an estate and the brother didn't sign off because they didn't bother to figure that out and so the title company ended up writing the brother a check in order for him to sign a release because old Dave already owned the property and so I'm a huge believer in title insurance for that reason i'm really thankful you've got it but i think the answer is your title insurance company is going to solve this if the lien is legitimate i don't think it is because of because it comes after the deed is filed okay you can't just file crap after the deed is filed you can only file it prior to

if they filed it prior to that's fine but um But, you know, no, I think the lawyer's smoking crack. But I may be wrong. I mean, out of all the real estate deals I've done, and I've been doing real estate deals for 40 years, I've never heard of a deal like this that would stay put. So prior to, and the title company missed it, well, title company's getting ready to write a check. Okay? But this is not prior to yeah and the title company missed it well title company's getting ready to write a check okay and uh but uh this is not prior to i don't think this lawyer's got a case i think the state screwed up but but if he does the title company is your best bet to handle it um really

not the attorney general and really not and the attorney general works for the state works for the same people they're the ones that file the lien i know Works for the same people. Well, they're the ones that filed the lien. I know. It's the same people. It's very unethical. Yeah, it's the same people. Yeah. So I'm going to guess and say this is not as much unethical as it is just incompetent.

Yeah, this is an accident, it sounds like. And then the lawyer, he thought he'd see if he could push you around a little bit, see if he could get the money. But, nah, I don't think so that's like yeah that's like coming out three cars later like hey this guy who bought this cadillac seven years ago he owes us some money so you need to give us that car let's get do that well you can do that in the case of theft if you stole it that's right if it was stolen and fenced or like buying stuff at a pawn shop somebody can come back if you bought it from a fence if you bought stolen items you'll lose that item that's true but in real estate the ownership is established and the title the cleanliness of the title is established at one

place in one place only and that is in the register of deeds at the courthouse that's true in every state in the united states and so in real estate law they taught us as we were as i got a degree in real estate it's called a race to the courthouse whoever files first does when so so let's say you and i both have a deed to a piece of property in our hand the one that files it first is the owner i'm letting the air out of your tires you know there it is so there's no such thing is that happening but i mean the concept being you know if you have a lien and you don't get it filed before the property is sold, you've got to try to take action against the former owner and get money out of his bank account that he got from the sale, which is the state's position here.

And the lien was technically your collateral, and you missed it, right? Yeah, yeah. And so now in the event of a foreclosure, they can go back on the rights of redemption. There is that. But not after a straight arm's-length transaction sale. You just can't willy-nilly walk along and just start plopping stuff down on other people's property. That just doesn't make sense. So I may be getting ready to learn something. I may get a letter from the state of wherever he was telling me I'm wrong,

Ohio, but I don't think I will. We'll see. And, you know, if you have a situation like this, he did the exact right thing. He went to the title company. One more time, never buy a house or any piece of property ever without title insurance. For 99% of you that are not professional contractors, don't buy a house without a home inspection.

If you are buying a piece of property other than a standard cookie cutter subdivision lot, if it is a, quote, piece of ground, always get a survey because neighbors have funny memories about surveys and about right of ways and about all these other things and so you need to actually know what it is you're getting and sometimes a survey is costly on a piece of ground a piece of rural property because you know it's from the old oak tree to the pile of rocks in the corner. Literally, my neighbor told me, your place starts over at that rock under the tree. That's a verbatim quote. Yeah. That's right.

Yeah. He's accurate, but that was the quote. I've sold enough farm property in Tennessee, and Tennessee is very irregular property lines, not like the Midwest where you've got squares and townships and everything's in a perfect little square and you can figure it out, but not in Tennessee. It may follow the creek, and it might not follow the creek. So you just don't know. You really need to get a survey, or the crick, as the case may be.

But, yeah, so real estate is a fun business, but always take the time to get your documentation. I sure hope the guy hadn't lost 70 grand,000, but I don't think he has. I hope he doesn't lose a penny in legal fees here. Wow. That's pretty ballsy right there, but we'll see. I've got bigger concerns if the state government can just write me a letter that says, Hey, the guy before you had some problems, we're going to take that.

Yeah. The IRS, I mean, you would think the IRS would pull something would pull something like that yeah they don't place a lien after the fact now if they place a lien prior to they just put nails in the coffin of the guy he's stuck right but uh man because the irs dealing with kgb is a trip but uh um man but yeah that's an interesting story right there very interesting hey every time you hear someone do their debt-free scream it's because at some point they said i've had enough i'm not living like this i've had it and when you get mad like that and you do what they did your life will change right now inflation stupid credit card bills waiting on Washington to fix your life by forgiving your student loans.

Not going to happen. He's going to announce this week that student loans are going to be forgiven. You need to read the fine print. He doesn't have the power to. He's not really going to do it. He's going to do something that sounds like he did it so that he can get some help into the midterms for his buddies. That's all that's coming. You have to take the course that gives a step-by-step plan that helps you get out of debt and be able to build wealth it's called financial peace university nearly 10 million people have beat debt using this they've learned how to budget have learned how to become outrageously generous and become wealthy guys stop letting your debt and money stress control your life say enough go to ramseyolutions.com slash enough and we'll get you into Financial

Peace University. Help get this stuff going. RamseySolutions.com slash enough. ДИНАМИЧНАЯ МУЗЫКА Dr. John Deloney, Ramsey Personality No. 1 bestselling author, is my co-host today in the lobby of Ramsey Solutions on the debt-free stage. Patrick and Beth are with us. Hey guys, how are you? Hey Dave. Welcome. Where do you live? Midland, Michigan. Oh yeah, fun. Welcome to Nashville and here to do a debt-free scream. How much did you pay off? $245,000. Yay! yay how long did this take two years good

for you boom knocking it out and your range of income during that time 190 000 to 250 nice jump in two years what do you guys do for a living uh we are in medical sales. Both of you? Both of us, yeah. So what do you attribute the $60,000 increase in pay? Y'all just sold a whole bunch of more medical? He sells medical plexiglass. Exactly. So the bulk of it was really that Beth changed jobs. Oh. So she went to a different position.

Ah, that's much more lucrative then. That's exactly right. Yeah, well to go. Good for you guys. Fun, fun, fun. Excellent. Proud of you. Okay, so what kind of debt is this $245,000? lucrative then that's exactly right yeah well to go good for you guys fun fun fun excellent proud of you oh so okay so what kind of debt is this 245 000 this was our house dave weirdos yes a couple of weirdos with us i love it all right weirdos how old are you i'm 37

and i will be 40 next month that was our main goal to do it before I turned 40. And you did. Yes. Okay. So what's this house worth? So we actually just talked to one of your ELPs and it's between 550 and 600. Okay. And how much in your retirement accounts?

Between 600 and 650. So you are Baby Steps millionaires. We are there. Easy and then some before you're 40. I love you guys.'re amazing okay how much of this is due to you stealing the money uh zero none okay because most everybody knows the rich people are crooks right yeah and you don't look like crooks to me so uh wow you guys congratulations thank you man thank you that i'm kind of speechless because you're not even 40 yet and you're millionaires. And I just keep looking at these three little kids.

And when you said we're millionaires, they smiled, which means you've had this conversation. Yes, we have. I mean, I'm just watching a legacy change right in front of me. It's beautiful. What was the hardest part about this journey? You know, for me, it was really just trying to stay motivated through that two years. And so being the mortgage, it was, you know, we'd go to the bank once a month and make a big payment. And I'm kind of a rip the bandaid off kind of guy.

So I wanted to make that next payment and that next payment. So just waiting that 30 days to make that next payment was really, really tough for me. So actually what I did was started making payments every two two weeks that way i could kind of get that you know that high of of making that payment and then just wait another two weeks rather than having to wait an entire month this guy got he got a dopamine hit making payments i hated i hated that bank so much i'm telling you that's a good bank to hate right there well done what was your favorite uh in retrospect now, what was your favorite disagreement over the last few years?

$250,000 y'all paid off. Y'all could have done a lot of fun stuff with that money. We could have, but it was definitely worth it. I've got a great wife and probably one of the biggest disagreements is I guess

she wanted to get her hair done. And I'm such a cheapo that it was always. You don't have any hair. You don't have any. No, her didn't. I know. I know. Getting your hair done often is very expensive.

I don't get a say in my wife's hair. I don't have any. I think, yeah, he's right. I would say that. Yeah. It was, you know, those little things. We were huge in budgeting. We weren't previously.

Where it was, we did, we kept track of where our money went at the end of the month. But eventually, we told our money where to go. And that was huge. How did you get connected up with the Ramsey way, this whole process with us? Yeah, so actually, I was introduced to you about 13, 14 years ago when I started dating this girl that was reading the Total Money Makeover. And she was working on getting some credit card debt out of the way. And I just, at that point in my life, I wasn't ready to follow someone else's plans because I thought I was just too smart. And so fast forward, I convinced that girl to marry me. And then we lived the next nine years

of marriage just being normal. And then one day I was driving down the road and one of my coworkers, she said, you know, maybe you should find a podcast to listen to because I was sick of listening to the same songs over and over. And so at that point in time, I was looking at how do I start a zero down real estate portfolio. And so I typed into the podcast financial podcast and up came the Dave Ramsey show. So I thought, Hey, I remember this guy. So I downloaded the podcast and the first show that I listened to was a Dave rant. And you were talking about be a victim in your story. And that really hit home with me. And then you started talking about leaving a legacy and changing your family tree. And that's really

where something just snapped inside of me. And so I actually went home and I had about $20,000 in student loan debt at that time. We had a big savings account because we thought that's what safety was. And so I told Beth, we're going to pay off this student loan debt. And we sat down that night at the computer, paid it off. She's like, who are you? And what have you done with my husband? She was just waiting for me. Man, I've heard of women playing a long game. That was well played. That's a long time. She knew it was in there. Yeah. Yeah. I've had your book since 2009. Took us a while, but we got there. And so then once we paid the student loan debt off, it was like, that was too easy. So what was next was the mortgage.

And I knew that in order to really make that change behaviorally, I had to have some kind of sacrifice. So that's where I got the idea of, you know what, let's just tackle this mortgage. And it started off as a five-year plan and then quickly became, you know, a two-year journey. Boom. You got addicted to the make and payment. That's exactly right.

Yeah. That progress, it'll hook you. Yeah. And especially our kids. So our kids were huge motivation for us. I can remember, so my daughter, she would help color in the bricks on the chart that we were using. And early on in the process, I had just made like a $4,000 or $5,000 payment at the bank.

So I was walking pretty high. And I came home and Madison, she she colored in a couple of bricks, and then she looked at me, and she said, Dad, we've got to do more. Love it, Madison. Jack them up. I love it. All right. How does it feel to be completely free?

I don't think it's fully set in, but it's incredible. I mean, it's just waking up every morning knowing that, you know, no matter what happens, a pandemic, whatever, nobody's taking our house. Amen. Congratulations, guys. Changes everything. So proud of y'all. Thank you.

You are amazing. All right, bring the kiddos up and let's introduce them. We've got a copy of Baby Steps Millionaires for you. How Ordinary People Build Extraordinary Wealth, How You Can Too. These guys did it. They're 40 years old. We're going to give you another copy of it or give. These guys did it. They're 40 years old. We're going to give you another copy of it or give you a copy of it.

You should be in there. And Financial Peace University membership for a year. You're welcome to give any of this away if you want and get somebody else's journey started. And also a total money makeover book totally for you to give away because you've already got one. That's amazing. All right. What are the kids' names and ages? So this is Madison.

She's nine. This is Henry. He's six. And this is Hugh, and he is six as well. Oh, a couple twins. A couple of twins. That's why we got to look and see who they are. And Madison is the lady with the bricks.

She's like, Dad, we got to do more. Way to go, Madison. Way to go, Madison. You're amazing. Very cool. Hey, you guys changed your family tree. I'm so proud of you. Thank you. It's a complete, we're looking at the picture of a legacy you guys changed your family tree. I'm so proud of you. Thank you. It's a complete, we're looking at the picture of a legacy right in front of us.

Not even 40 years old. So very powerful. Well, well done. Patrick and Beth, Madison, Henry, and Hugh, $245,000 paid off, housing everything, in the process becoming Baby Steps millionaires. They did it in two years making 190 to 250 count it down let's hear a debt-free scream ready guys three two one we're debt-free that's so fabulous oh man dave how do we have to have this talk real quick what are we supposed to say about getting our wives getting their hair their hair done

nothing nothing um but the uh uh but here's the thing the. The spouse that is on board is going to always control and be reasonable about any expenses. And so if I've got an expense, it wouldn't be hair with me, obviously. It'd be something else that's associated. Then I'm going to limit that because we have a goal that's right so i'm gonna limit if i'm the lady the hair the nails and stuff to reasonable level uh maybe scale back from normal to be able to hit the bigger goal it's part of the spirit of the process of doing this together but yeah i don't get to go in and say you don't know i don't have that option. This is, Ramsey Personality, is my co-host today. Our question of the day comes from Blinds.com.

They have a 100% satisfaction guarantee. That means even if you mismeasure or you pick the wrong color, they'll remake your blinds for free. You get free samples, free shipping, and with the new promos they run every month, you'll save even more. Use the promo code RAMSEY to get the best possible deal. Today's question comes from Brian in Texas. Brian asks, I'm 27 years old with a bachelor's degree in accounting and $40,000 in debt, 28K in student loans and $13,000 in credit cards. I have a full-time job making $41,000 a year and live at home.

They, I'm assuming it's his parents, want me to stay with them as long as possible because they are enablers. I want to move out and I ask them to set a deadline for when I have to move. They are giving me until February of 2023. This is so backward. I don't have any money

saved because I've been throwing it all at the debt. Is it wise to stay with my parents until I'm debt free or save up and move out while continuing to pay off debt yeah there's a lot of things happening backwards here yeah i would say usually parents throw the kids out the kids don't ask the parents to throw them out that's a little backward yeah well it's like mom and dad are saying we want you to stay with us forever and then he says no give me a date when i have to be gone and they're like okay okay, a year.

And he's like, yeah. I get it, dude. Brian, listen, if you were here with us, we'd all be laughing, and you know that. We'd be laughing. Here's the thing. Save up some money and get an apartment. Yeah.

I mean, yeah. Give out. And I don't know why you only make $41,000 a year with a degree in accounting. Yes. Your job sucks. You need to go get Ken Coleman's book and look for a better job. Also, you know, that's horrid. Yeah.

No, you do not need to stay there until you're debt free. That is not a guideline. Um, yes, it would be mathematically more efficient. Um, I will tell you from personal experience, Brian, that, um, I observed each of my children after college, either setting up house on their own so to speak um or one of them actually moved and lived with us for about three months and then with a game plan to move out very quickly but in every case when they moved out and had to buy their own milk had to pay their own light bill or the electricity got cut off had to buy groceries or there was nothing in

the refrigerator had to do laundry or there was no clean underwear in every case when they did had to do those basic menial adult tasks i visibly watched them change in that first year they were out. And they were already mature, hardworking, good people. But I watched their emotional development accelerate when they left the nest. And some more obvious than others in different situations. But it was palatable that no more checks coming from me and no more laundry done by your mom and when they had to pick up that and run with it it changed everything so yeah I always

recommend as quickly as a young person can reasonably get out on their own even though it does not appear to be mathematically the correct thing to do. It generally ends up being mathematically the correct thing to do because it accelerates you, and you are what creates your income. So you probably, even though you might not associate it with the activity of having moved out, it changes how you walk. It changes your swagger, your body language language and so you go get money more often right and uh because you turn out turn out to need money out here in the world and so

it's just good and it's good for you i would tell you i would highly recommend you do that not in a panic not in a freak out i mean if you want to but i wouldn't wait until february and i certainly wouldn't wait till you're out of debt. I'm proud of him for recognizing, wait a minute, I'm being enabled. My immaturity is, you know, it took him until he's 27, for goodness sakes. But, hey, you figured it out. Move out and let's get this thing going. Some people are 35, 45, 55, and they haven't figured out yet that. Well, they're like characters in a movie, though.

I mean mean that's just ridiculous yeah or callers on my show yeah yeah well yeah i mean it's listen uh uh an eagle that does not leave the nest eventually is called a turkey right so you you need to um or the way i describe it is if you are constantly going into the weight room and helping your kids lift the weight they're never going to develop their own muscles and eventually you're you're helping them If you are constantly going into the weight room and helping your kids lift the weight, they're never going to develop their own muscles. And eventually, you're helping them out causes them to change their heart. It is the extension of the helicopter mom, helicopter parent syndrome. To just keep them in the basement forever.

Like, oh well. Okay. Yeah. Ashley's in Denver. Hey, Ashley, what's up? Hi. Thank you for taking my call. how can i help uh sorry uh i apologize i'm a little nervous that's okay um we've never lost a patient what's up uh i had a quick question or a couple questions in regards to my student loans um i recently received notification that they are they have

been approved to be forgiven through a class action lawsuit. And through the research that I've done, I can't quite determine if this is taxable income or non-taxable income. They're forgiven because it sounds like it was a private school and it went broke. Yes. It's the lawsuit currently going on through the department of education yeah yeah yeah and uh there's been a couple of big ones come down lately and you're probably in that yeah so that is one of the instances the student loan forgiveness is real and does happen so i'm guessing that probably a, very likely case that your student loans will be forgiven.

Now, normally debt that is forgiven is taxable income. For instance, if you owe MasterCard $4,000 and you don't pay them and they send you a letter saying, you know, you owe them $5,000. They send you a letter saying for 50 bucks, we'll forgive this. You send them 50 bucks. Then you get a tax bill for the difference you get a 1099 receipt for the difference on taxable income i do not know on student loan forgiveness due to fraud by the uh which is what this case is by the institution if that is a taxable event or not. That may be nuanced under the law, and it may be a type of debt forgiveness that is not taxable.

But otherwise, debt forgiveness is taxable, by and large. I mean, so what I would do if I were in your shoes, because I don't know the answer to your question, I'm sorry, is I would go to RamseySolutions.com, click on ELP for taxes, get a tax professional that we recommend, and they can look up the regulation on this particular thing, this nuanced part of the law, and see if there's anything that goes with that. It wouldn't surprise me if it's not taxable. It really shouldn't be. It makes sense. It's logical that other types of debt forgiveness are taxable because that's money that you owe. In this case,

they're saying you really don't owe it because you weren't really given anything by this horrible, incompetent institution that went broke. Tell me about this. i didn't know this so if i owed fifty thousand dollars somebody pays off that debt the government registers that gap as income yes okay yeah even if it goes directly to the loan debt right but even if it goes directly to the lender and not through me yeah it doesn't matter it doesn't matter no i mean if they forgive the debt like it usually comes up if you're negotiating a balance on an old bad debt uh okay you know like you owe them ten thousand dollars from five years ago on a master card and you call up city bank and you argue with them and they go well you know we'll take two thousand dollars as settlement but i pay taxes on that eight yep wow

i didn't know that okay they're gonna send a 1099 out on that. They're supposed to. Because they're writing it off. Because it's a business loss for them, and it's a gain for you. Right. Because money you legitimately owed, but because it was bad debt, they decided to take less for it. Oh, I did not know that. So you did gain from that. But the theory in the student loan forgiveness is that these jack-leg weird private school things would go semi-scam type things. They were predatory, yeah.

Yeah, they were predatory. They would get people into debt, and then the education or the certifications that they gave them weren't worth anything and would go broke. And so, really, you haven't gained. That's about making you whole. Yeah, they're just making you whole here. So, it's a different theory anyway. But whether or not they're going to tax that, I don't know.

You have to check your tax person. Not very good at some of those things. This is The Ramsey Show. Dave here. You can find all of our shows with the Ramsey Network app on your smartphone. It's the only place to listen to the entire back catalog of episodes. Download the Ramsey Network app in your favorite app store today.