Quote:
Originally Posted by shawnee
What can the average person do to prepare for a 'crash' or 'depression'. If your credit cards are paid, and the only debt you have is your home, would you consider that a smart thing to clean up? I mean, you gotta be doing pretty good if you own your home; living in the country on some land - even better. Just curious.
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Well, wait a minute there. Either you own your home, or the bank owns it. You can't both own it at the same time. If you're still making payments on the home, then you don't own it, the bank does. You're merely renting the home at an exhorbitant rate on a glorified land-contract.
For the inquiring minds, why are rich people rich and poor people poor? Because rich people don't do stupid things like pay $720,000 for a $325,000 house. That's what a stupid poor person does.
A rich person pays $344,096 for a $325,000 house. What does the rich person do with the other $375,904 they save? Well, uh, that's what makes them rich.
Rich people will live in an apartment for 6-8 years to save money to put 50% to 70% down on a home. Poor people in their quest to satisfy infantile urges buy homes with 10% to 0% down.
Anyway, read your mortgage contract. Your looking for something called an "All Call" clause. Sometimes it's called a "Demand" clause or "Instant Demand" clause depending on what region of the country your from.
What is it?
Your credit card card-holder agreements and auto loan notes have them. Your credit card bank can reduce your credit line to zero, cancel your card, and demand payment in full, now, for any reason or no reason at all.
That, is what an "All Call/Demand" clause is.
If your mortgage contract has such a clause, your bank can say Mr. So-and-So, you owe a balance of $124,000 on your mortgage, that balance is due and owing in 15 days. Have a nice day.
If you fail to come up with $124,000 in 15 days you just defaulted on the note and the bank can/will foreclose on "your" home.
Should you panic? No. You can file a Chapter 13 Bankruptcy Petition.
Why would you want to do that? To stop the foreclosure proceedings.
A bad bankruptcy attorney should be able to stall/delay the proceedings at least two years. A good bankruptcy attorney up to 5 years. Why would you want to do that?
To buy time. So you have two years to beg/borrow/steal $124,000 to cover the note or you can find a buyer for the house.
Now, notice my choice of words. I said, "find a buyer for the house." I did not say, "put the house up for sale."
If your mortgage lender finds out that you're trying to sell the house out from underneath them, they will press the bankruptcy at break-neck speed and you'll be screwed.
You cannot use a traditional realtor. You'll have to call an old school realtor. A private one, not associated with any of the big realty companies. S/he will have 15 to 30 years of experience and have a rolodex with hundreds of potential buyers to hook you up with and can probably do so with just a few phone calls over a few weeks.
Once that's taken care of, you dismiss the bankruptcy proceedings and there's no harm to your future credit rating.
That tactic also works if you get laid off/terminated and can't cover the mortgage and the bank forecloses.
Is that beautiful or what?
During the Nixon and Carter recessions some banks did call some commercial notes, but not notes on private real estate. However, many banks did call notes during the Great Depression on private real estate, especially those banks that were floundering. Some people skated because their bank closed and never re-opened. They just waited a few years and filed for Quiet Title and they got the deed without paying off the note.
Outside of that, your consideration should be how long can you last and what are you willing to give up?
Look at your spread sheet and see what it says. You should have one and you should be able to punch in any dollar value for fuel and see what your fuel costs per month would be. Does your spouse work? How much money do you spend in fuel costs per month now? $300? Can you afford to pay $900? If not, what are you willing to give up? Starbuck's? Eating out 15 times a week? Cell phones? Cable/Satellite? Internet?
If you got laid off/terminated, what would you be willing to give up? How long can you last? How long before you find another job? 2 years? 3 years? Do you have access to public transit? How far do you have to drive to entertainment/restaurant venues, shopping venues?
You might want to think about selling your house now, while you still can, and while you can still break-even/make a small profit. Suppose you sold your home for $225,000.
You find another house with quick access to entertainment/shopping venues and with access to public transit. It looks like crap but it's only $65,000 and it's in a fairly safe part of town. Pay cash and own it out-right. Spend $12,000 to $15,000 to fix up. Re-grout the tile in the bathroom, new carpeting/re-finish the wood floors, paint, new wiring if it needs it, HVAC system, new storm windows. You're all set. Put $15,000 to $20,000 in your bank, put $40,000 in a bank in the UK, like Barclays, and $40,000 in a German bank, like Sparkasse.
So you get laid off or fired, who cares? You have practically no expenses and lots of money saved up. So a year and a half later you burned through your $20,000 in your bank and you need more money.
No problem. Walk over to an ATM, pull out your Barclays or Sparkasse bankcard and withdraw $100. You can't do that with gold, and by the way, the dollar slid some more so the $40,000 in pound stirling is now worth $50,000. You made $10,000 without doing squat. The $40,000 in Euros sitting in the Sparkasse is now worth $48,000 to $50,000 and you didn't do a thing.
Putting your money in gold isn't worth the hassle because you won't have instant access to it. The fees alone just to convert it from gold wouldn't be worth it and they damn sure aren't going to let you convert $40. Instant access is also important should you find out that you're one of the distinguished persons invited to stay at one of the concentration camps Haliburton, KBR and Blackwater have been building over the last 20 years.
Should you decide to politely decline the invitation, you'll need instant access to your money any where in the world you happen to end up in, and I doubt you'd be able to pull it from an American bank, and if you did, you'd just be telling them where you are.
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