WHAT TO DO.......????

[Therapy]

Originally Posted by Tspringer

Welcome to the New America. The harder you work, the more you invest into a business, the more you earn..... the more our system will punish you. The less you work, the more you fail, the greater your demand for and dependence upon assistance, the more the Govt. will step up to hand you money and services. That's just the way our system works.

It is highly unlikely that housing values in California are going to return to 2006 levels anytime in the next 15 years or so. That is unless the Govt. manages to inflate things through money supply manipulation to absurd levels and if they do then we all have bigger problems from currency devaluation.

Unfortunately, doing the right thing is going to leave you underwater and chained to your home for a decade or more. Or, you can quit making the payments and sign up for a bailout of your own.

I was raised to believe that we are all responsible for our own actions and the consequences of our actions. If we take on a debt, we are obligated morally to repay that debt. If an investment does sour, we lose and we must deal with it. But when the Govt. begins arbitrarily altering these kinds of basic societal rules and playing social engineering games with our tax dollars and fiscal system it sure makes one question these fundamental rules for life.

Part of me thinks that we should all quit our jobs, quit making loan payments and sign up for every Govt. welfare and bailout program that exists. All of us. Then perhaps when there are no suckers left paying into this Govt. fiasco and everyone is on the receiving end it will be demonstrated plainly enough for even the most stupid Govt. bureaucrat to understand that a Bailout and Welfare driven system does not yield a viable economy.

Perhaps we should ALL become John Galt.




Terry

LOL Terry

I have spoken to my wife and children and many work mates about doing just that. I am pretty sure they now believe I am not kidding. I may well reach the point where I will quit and sell all I have for whatever I can get at the time. Then the IRS will see that my income is near zero. Then I will probably be qualified for lots of stuff.

[imagine2frolic]

Therapy,

Maybe they will house you in a new Manta

[TaoJones]

Originally Posted by skifinnatic

Ok....here's my story....35 yo male with 30 yo wife, 3 kids, ages 6,4, and 2. I make $110,00/year, my mortgage balance is $600,000, my house is worth $525,000. Neadless to say I'm upside down. My goal before the housing market tanked was to use my equity to purchase my live aboard and then sell the house. I DO NOT WANT TO GET LANDLOCKED in my house. I want to get out on the water with my family. I feel stuck now.....any suggestions????

In reading some of your other posts since you came aboard here last May, I get the impression that you're unhappy in your current situation and want to sail over the horizon and leave it all behind. As a PADI instructor, with a wife who also dives, I gather that you'd be happier if you and your family relocated to somewhere more tropical, preferably aboard a 40'+ catamaran, taught diving to others to support yourselves and maintain the vessel, and watched your children grow up in the carefree cruising lifestyle with nothing but memories of joy-filled days in the sun and surf.

You know, that does sound good! And there are probably a few people in the world enjoying just such circumstances. Chances are, though, they were independently wealthy before they cast off, probably well-educated, have a solid support system of friends and family and didn't choose the cruising lifestyle as a means of escape from a situation that made them feel trapped underwater.

Before you opt to just mail in the keys, however, you would be well-advised to discuss it in depth with a cautious accountant and/or tax advisor. While the entity holding your mortgage may not pursue you for the shortfall, don't be surprised if the IRS considers the "relief" you gain by abrogating your obligations under your mortgage contract to be imputed income.

That is, if the present market value of the house is $525k when you walk away, and the mortgage balance is $600k, the $75k relief could be added to your $110k salary as additional ordinary income, and you could be taxed accordingly.

Originally Posted by skifinnatic

Well....that's what i'm looking for...a "new plan".....would it be better to buy my boat now, and walk away from my house, letting it foreclose?? If I walked away from my house before i bought the boat, my credit score gets dinged, and hence, cannot buy boat. I could buy boat, move family aboard, and walk away from the house.??

I would be more than a little surprised if anyone on the CF board advised you to do as you suggested; i.e. contract for the boat, then walk away from the mortgage contract on your house. In my view, that is despicable, and as others have suggested, potentially fraudulent. I hope you aren't seriously considering doing that.

I'm probably old, and old-fashioned, but I think that kind of behavior does not go unnoticed by your offspring - even dishonors your service with the Corps. Please think it through carefully.

If, as HyLyte infers, you are heading for bankruptcy, then that is different. That is a legal situation that may be unavoidable, and no moral condemnation should be attached. S**t happens! If BK is your only option, deal with it honorably. Hang onto your (well-paying) job, move your family into more modest quarters, and begin to rebuild your life. That could well be the greatest "gift" you could give your children, not a life aboard some cramped cruising vessel with no ties to land, friends or family.

The "good" news is that a massive wave of inflation, possibly hyper-inflation, is inevitable. For awhile, it may seem like oxygen to a drowning man, but the devastating consequences of runaway inflation will ultimately prove that the cure is sometimes worse than the disease.

When it arrives, though, and if you still find yourself "landlocked" in the house, bail out at that time! It could be a few years before we get there, but don't think for a second that what is now perceived by many to be a time of deflation will prevail. Inflation is the only method available to rescue the capitalist system of the West, and never in history has a government with the option of creating money and credit been able to resist the temptation.

Hang on, skifinnatic, if you can. You, and your family, will be the better for it.

TaoJones

[svHyLyte]

SoStar--I didn't know you cared...

As to mincing words, candor has become all too rare in our, "gee I don't want to offend anyone" so PC society. We, for the most part, are all adults and, short of a gartuitous personal attack, should be able to accept criticism when it is appropriate. In my, first, profession a "Crit" was a vital tool for learning if naught else. Otherwise one's first response to a questioner seeking an opinion should be "do you want the truth or do you wanna stay friends" (to use the colloquial).

Concerning the term "Obamination", FWIW I use it as an approbation as I beleive it was Keith Obermen or one of his cohorts, at that bastion of unbiased news reporting, MSNBC, that coined the terms: "Obamanation"--in the phrase "...I'm looking forward to living in the new America, the Obama Nation"; and, "Obaminites", used then in the same vein as "Clintonites", "Nixonites" and, (not to mince words, of course) "Termites" but that as an epthitet describing those that felt that Bloomberg should willingly step down upon reaching his (term limit), rather than conspiring to overturn a law approved by the vast majority of NYC voters.

Finally, as for the original poster, whether he chooses to see the value in my or anyone elses observations on the matter, that is his choice so long as he is willing bear the attendent Cross. As to the justice of his consequent anguish, however,
(t)here Homer nods...

s/v HyLyte

[skifinnatic]

Originally Posted by svHyLyte

SoStar--I didn't know you cared...

As to mincing words, candor has become all too rare in our, "gee I don't want to offend anyone" so PC society. We, for the most part, are all adults and, short of a gartuitous personal attack, should be able to accept criticism when it is appropriate. In my, first, profession a "Crit" was a vital tool for learning if naught else. Otherwise one's first response to a questioner seeking an opinion should be "do you want the truth or do you wanna stay friends" (to use the colloquial).

Concerning the term "Obamination", FWIW I use it as an approbation as I beleive it was Keith Obermen or one of his cohorts, at that bastion of unbiased news reporting, MSNBC, that coined the terms: "Obamanation"--in the phrase "...I'm looking forward to living in the new America, the Obama Nation"; and, "Obaminites", used then in the same vein as "Clintonites", "Nixonites" and, (not to mince words, of course) "Termites" but that as an epthitet describing those that felt that Bloomberg should willingly step down upon reaching his (term limit), rather than conspiring to overturn a law approved by the vast majority of NYC voters.

Finally, as for the original poster, whether he chooses to see the value in my or anyone elses observations on the matter, that is his choice so long as he is willing bear the attendent Cross. As to the justice of his consequent anguish, however,
(t)here Homer nods...

s/v HyLyte

I'm sorry to say HyLyte that MSNBC and unbiased news should not be used in the same sentence. As for your political views, please keep them on other forums. My view was not to get into the political arena, but since you have so eliquintley brought it up, who's ex-lover worked at Fannie Mae when the Fit hit the Shan??? Hmmmm Barney Frank??? And Frank receives donations throughout the years from Fannie and Freddie....Hmmm..i'm sure it's nothing like Obama had no relationship with Ayres...Ok HyLyte I see where you come from...

[Boracay]

There look to be several elements to this discussion.
1) The bad financial situation. We are probably better off in Oz than yous but every time I see the news some commentator is badmouthing. When I check it's sometimes a distortion or worse of what is actually happening. I remain surprised by the continuing assumption that experienced people will deliberately "crash" the economy. My rule of thumb was that everthing takes 3 years and it might still be true.
2) Being "trapped" by financial, contractual or family circumstances is a feeling. It might or might not be real but to me the key is to deal with it as an emotion. A machine will not solve it.
My solution, starting from a rather different position to yours some 30 years ago, was to sell my boat, travel the world in a few different jobs and save a little money.
Most of it was really enjoyable. My only regret is no children.
Now I have a big project boat and despite my grumpiness I sometime admit to enjoying that too.

[Maren]

Originally Posted by skifinnatic

I'm sorry to say HyLyte that MSNBC and unbiased ...

Could we go back to the topic? You know, where you disclose significant parts of your finanacial situation to a group of complete strangers?

I get enough opinions on politics at work and this is how threads end up getting locked by the mods.

[anglooff]

My suggestions would be....

1. Decide to make your family christmas and new year holiday as enjoyable as possible. Your youngest two need little to have a great time, but attention. (they will probably have more fun with the empty boxes, that that they surround).

2. Make a New year's resolution, that you will make NO decision about your future plans until some normality returns to your country. (Probably a year)

3. Re post your thread then, with what if anything has changed... for better or worse... and more importantly how you have applied your Corps training to pramatically analyse your options regarding your objectives and how you have determined to achieve them.

Allow me to wish you and your family a happy holiday season and a positively pragmatic 2008

Regards

Alan

[Christian Van H]

Here's the advise you asked for: DO NOT DEFAULT! I do not want to pay for your mistakes. You owe $600,000 on your house? Funny, but I bought within my means, and I will go sailing, even in these tough times. I cannot believe ANYONE here would feel sorry for you. My guess is ya bought a flashy house, and now ya want a flashy yacht. Prove me wrong...Maybe, if you hope and pray, you might just get a bailout. Its goin' around you know...

[Tellie]

I have no love loss for mortagage companies, insurance companies or the like. But you borrowed the money and no one forced you at gun point to sign on the dotted line. You owe it, pay it back. Walking away is stealing plain and simple. As CVH says I don't owe it to you to pay for your mistakes. A real Marine would know that.

[Therapy]

Originally Posted by imagine2frolic

Therapy,

Maybe they will house you in a new Manta

OOOO....AAAAAHHHHHHH!

YESSSSS

With this color trim.........

[Janet H]

Just a gentle note from your moderators.. please remember to avoid personal attacks and especially general political rants.

[porttack]

TaoJones is right. The IRS will treat any unpaid loan amount, which your bank forgives and has to write off, as ordinary income to you. Oouchh!! It's to bad most people are ignorant of that fact before they decide to walk away from upside down situations. What's worse is many others advise to do just that, thinking they're giving clever and sage advice.

Now that may not be a problem for you. Maybe you're willing to take the family ex-pat and remain fugitives from the USA. However, if the world economy is hurting for very long it may not be too easy living off foreign coastlines without a job and with 4 other mouths to feed and knowing you can't come home.

Where does the sailing kitty come from? What happens when the rig fails, or the motor stops running. You are asking people to condone a very rash and irresponsible action, which may have grave long term consequences. I thought the various posts suggesting buying a dingy, sailing lessons for the kids and a savings plan made a lot of sense. Eventually the market will turn and you will be made financially whole and hopefully just as determined.

Don't let stubbornness leave you marooned on a poor shore with a wife and 3 hungry kids, no money and no motor. El Salvador will not treat you the way the USA treats destitute people from El Salvador. Is this the education you want for your kids? Way to many children have to learn that lesson around the world.

Good luck with your dilemma.

[kevingy]

Originally Posted by skifinnatic

Ok....here's my story....35 yo male with 30 yo wife, 3 kids, ages 6,4, and 2. I make $110,00/year, my mortgage balance is $600,000, my house is worth $525,000. Neadless to say I'm upside down. My goal before the housing market tanked was to use my equity to purchase my live aboard and then sell the house. I DO NOT WANT TO GET LANDLOCKED in my house. I want to get out on the water with my family. I feel stuck now.....any suggestions????

skifinnatic, I feel your pain. I know about feeling stuck. I'm not going to go into why I know where you're coming from, but I have been there - as recently as a few years ago. In some ways, I'm still right where you are - stuck. The only difference is that I'm closer to the finish line. I can't tell you what to do, but I can tell you what I did.

1. Reduce your lifestyle as much as you possibly can, if you haven't already. Justify every purchase and scrutinize every bill. Squeeze every penny out of every dollar you make. I was amazed at how much I was saving once I cut the fat. Once the fat is gone, cut more. Unplug from the grid as much as you can. If you can't eat it, wear it, or use it for shelter, you really don't need it.

2. You have been working hard. Work more, if you can. I picked up extra contract work on top of my 9-5 job. I make more than you do annually, but I still recycle aluminum cans for extra dollars. Sell your stuff on eBay and at flea markets. Take every opportunity to earn a buck. Put those kids to work too! <jk>

3. Take all the money saved and earned and pay down your mortgage as quickly as possible. If you put the money in the bank or invest it, your returns will not be greater than the interest you're paying on your mortgage. In addition to the financial problems associated with being upside down in your mortgage, there is a psychological affect as well, in my opinion. The $75K you’re upside down is a lot of money. It’s about the amount of credit card and auto loan debt I’ve paid off in the last 18 months.

4. Buy a small boat. Not only for keeping the addiction to sailing at bay, but to gain experience. Some here have suggested a dinghy. Personally, I suggest a small keel boat. You can sail a dinghy. Your family can sail and overnight on say a Catalina 22 or similar. You would be surprised what $2,000 - $4000 will buy you. When you get your big boat, you can sell it or donate it to charity for a nice tax credit.

5. When you break even in your house, start saving cash for your boat loan down payment. Down payments are 15-20% of the purchase price depending on lender, financing program, and terms. You may also need to pay off other (credit card and auto loan) debt before getting your boat loan. I would think, however, that your floating house expense is going to be much less than what you have now, improving your debt to income ratio. Don't buy a $600K boat!

I hate to say it, but in this economy, all you can do is work and save. You had a great plan to use your equity, but the economy didn't work with you. Unless you win the lottery or come into lots of money some other way, there’s nothing to do but be patient and be determined. It will happen.

Good luck!
Kevin

[BobJ]

Originally Posted by porttack

TaoJones is right. The IRS will treat any unpaid loan amount, which your bank forgives and has to write off, as ordinary income to you. Oouchh!! It's to bad most people are ignorant of that fact before they decide to walk away from upside down situations. What's worse is many others advise to do just that, thinking they're giving clever and sage advice.

I don't think you should walk away from your family's home (and that's what it is - just ask your wife). BUT you're getting bad tax advice. Law change, from the horse's mouth:
Mortgage Workouts, Now Tax-Free for Many Homeowners; Claim Relief on Newly-Revised IRS Form

Oh, and don't miss the name of the Acting IRS Commish!