Bob B.'s Financial Soundingboard

Our "for sale" house has a current, active offer. The new offer contract was signed 12-6. This is the third offer since October, and none of them have made it this far. We are in the "negotiation" stage. That is, our bank negotiating with the buyer. Just today we saw the bank's counter - they are about 6K apart.

Our buyer is getting a loan backed by the USDA Rural Development program. Kind of like an FHA loan, but for buyers in rural areas. My understanding is that a USDA RD loan means slightly different rules, and a few more hoops to jump through than an FHA loan.

Our buyer is waiting for the short sale approval before getting the RD inspections done. So, still plenty of chances for this deal to fall through. We cross our fingers and wait.

I need to talk to DW about it, but if this deal does fall through, I'm thinking about approaching our renters (again) about buying the house. They are interested, but claim to have no money for a down payment. And, her credit is trashed due to a recent divorce and foreclosure. Sound like prime buyers, right? They have been making their rent payment every month, although late, and seemingly later every month.

If we do approach them, at least this time we can arm them with the figures of what the bank will accept for an offer. We'll see.

Hopefully, this current deal pulls through. Then, we just need to kick the renters out. That will be fun.

Many of you may remember that we have had a house for sale for about five years. Actually, this week may mark exactly 5 years (seems like it was 1-17-08). Feb. 12 will mark five years since we've lived in the house.

We have been going through the short sale process since August. We've had two offers fall thorough, and now have a third active offer. This one is gaining some traction. We are in the negotiation stage. That is - our bank's representative negotiating with the buyer. Just today we saw the bank's counter. They're about 6K apart. We'll see where that goes.

We've not yet gotten this far in the short sale process before. If all goes well, the close may be in a month or so. If all does not go well ... well, we wait for another buyer. I should add that this buyer is getting a loan through the USDA Rural Development office. Kind of like an FHA loan, but for people in rural areas, and as I understand it, more hoops to jump through. The buyer is waiting for our short sale to get approved before he begins working with the RD inspections.

I need to talk with DW about it, but I think we'll approach our current renters (again) about buying the house, if this deal falls through. They are interested, but claim they have no money for a down payment. And, her credit is trashed due to a recent divorce and foreclosure. Sound like prime buyers, don't they? I will say that even though they are always late with the rent, it is paid every month.

And, if we do approach them again about buying the house, this time we'll be armed with some information as to what the bank will accept for an offer.

Keeping my fingers crossed!

This debt snowball thing is kind of fun when the snowball gets big, and starts crushing all the debt by its self. It takes a long time to get the snowball rolling, but it feels as if we've just gotten it to a size where we've pushed it down the hill, and gravity is taking care of the rest.

When we first started this quest, my idea was to follow more of a Dave Ramsey approach, and pay off debts by balance, smallest to largest. My greatest fear was losing an income source, like rent. My thought was that if one or two of the smaller debts were gone, we'd have an easier time making minimum payments on the remaining debts, if we lost an income source.

I ended up following the advice of the majority in the SA community, and tackled the debt by APR, highest to lowest. Of course, that makes most sense from a purely financial perspective - least amount of interest paid.

During the last two years, our income has remained steady. Actually, it's increased a bit. So, it turns out that highest to lowest APR has been the way to go. I can still see merit to both methods. If anyone who is reading this is trying to decide which order to tackle your debt, you're not going to hear a strong argument from me either way. OK, I chose highest to lowest APR, so clearly, that's my preferred method. That method also keeps your nose to the grindstone longer, because the individual accounts don't fall away as quickly, and you're forced to pay more money toward debt each month.

Anyway, three and a half months from now, we should be done with all of it! That's when the real discipline starts.

It's not everyday that you get a letter from the IRS. We did today. Naturally, it was the first thing I opened.

You may remember that last August we got a check from the IRS for an adoption credit. That check included $104.43 of interest. The mailing today was a 1099 reminding us that we are required to include the $104.43 interest payment in our 2012 Form 1040.

That's not such a big deal. Letters from the IRS can be a lot worse than that.

On a related note, you may also remember that we finalized another adoption in April 2012. I'm no tax expert, but it's my understanding that the credit for adoptions finalized in 2012 go back to non-refundable status. That's not so good. For us, anyway.

We deposited some money into our girl's 529 college savings plans. We opened a 529 for each of our girls when they were born. They both have pathetic balances.

The money we deposited this month was money that each of them have earned through their 4-H livestock projects. We deposited $1,900 into DD1's account, and $200 into DD2's account. DD1 has been showing and selling 4-H animals for three years, and this was DD2's first year.

Once we get the CC problem taken care of, college savings is yet another financial reality we will have to face. In 8 short years, DD1 will be ready. Ouch.

I know that it's recommended to have 3-6 months spending put away in an EF. We have about $1,000 in our EF, and that can fluctuate a bit each month.

I hope to have credit cards retired in May. And, I think we will. I'm thinking that after that phase of our financial life is over, our next conquest should be to beef up the EF.

I've had a figure of $10,000 bouncing around in my head for a while. I decided to take a more serious look at that number.

One month of spending in my family is about $4,680. So, a three month EF would be about $14,000. I was only off by 40%.

If I allocate the $750 that we've been sending toward credit cards lately, it will take about a year and a half to get it built up. OK, that assumes no withdrawals. Better make it two years.

So, here it is, a new goal! My goal is to have $14,000 saved up in an EF by June 2015.

I have solid net worth figures for Jan. 1, 2012 and Jan. 1, 2013. I had to do some financial forensic work to come up with a Jan. 1, 2011 value. I hadn't started posting here by then. The asset side is fairly solid, but the liability side is an estimate.
What I came up with is:

2011 net worth percentage increase = 19.6%
2012 net worth percentage increase = 78.9%

My retirement portfolio is my asset of greatest value. Thus, the performance of those funds greatly influences the change in net worth. 2011 was a crappy investment year, and 2012 was a better year.

And, of course, there is rapid debt payoff. While I was probably paying off debt a bit more aggressively in 2011, in 2012 much more of my payments went
toward principal, rather than interest.

I couldn't help myself. I projected my Jan. 1, 2014 net worth, based on projected decrease in debt plus monthly contributions to retirement, no asset growth. My projected net worth percentage increase for 2013 is about 32%.

I'll come back here in a year, and see how I did.

I've been gone for a few months, but with a new year, I thought I'd get started back up again.

I hope everyone had a Merry Christmas (or Happy Hanukkah), and a Happy New Year!

Despite holiday spending, we've managed to pay down quite a bit of credit card debt. Our current total is $1,963. Down from $4,587 in October. My goal remains total payoff next May.

We've also decided on our 2013 house project. We need something done with our back porch. My MIL is disabled, and has a great deal of difficulty entering our house the way it is. Also, it just plain looks very bad. We'll hopefully be getting a bid next week for a spring/summer project, but for now we're planning on saving $800 per month.

Just yesterday, I also began contributing an additional 1% of my salary per month to my retirement plan. I'll increase that again once the CCs are paid off. For those of you who may have been following my thread on the forums, I decided to stick with my employer, rather than the Roth. There were no transaction fees.

I have 2 high interest CCs. Really, at this point, I have one. CC1 is at 8.9%. CC3 is at 0.0% at the moment, and set to jump up to 23.99% at the end of December. So, that's why I say 2. One is high now, and the other will be high soon.

I'm at the point that if I transferred the balances of both CCs to a new 0.0 card, that the 3 or 4% balance transfer fee would be about a wash. The cost of the balance transfer would be about the same as I project we would spend on interest. So, we'll tough it out, and pay the balances as soon as is reasonable.

We are in a bit of a cash flow crunch this month. We paid property taxes and paid for new license tags and new driver's licenses today (we both have November birthdays). And, I'm expecting to fill the heating fuel tank this month or early next month. So, the payoff of CC3 might not happen before the end of the year. We should have it paid off by January, or February at the latest. But, it looks as if I'll be paying that ridiculous interest rate on some of the balance. Then, we can concentrate on CC1.

We've had a house for sale for five years. We haven't lived in the house for all but one month that it's been on the market.

This past August, we began the paperwork to get approved for a short sale. The mortgage company has made the process as slow as they can. We send in paperwork, and they wait three or four weeks to get back to us only to tell us that we need to send in more paperwork. We didn't have an offer when we began this process. Our hope was to get ahead on the process, so that when there was an offer, it the short sale approval could be expedited.

We decided we should get an attorney involved in the process. Our thinking was that the attorney could help speed the process, and help with negotiations down the line. The first attorney we spoke with said he doesn't handle cases like these. It cost us $45 to hear that. We set up an appointment with another attorney. I tried to better explain our situation as I was setting up that appointment.

We talked with the attorney last Thursday. That was a very good meeting. The attorney is about our age, he's a bit arrogant, and kind of feisty. But he also came across as nice, and someone we can work with. The kind of guy we would like in our corner. He also assured us that he would attempt to negotiate no 1099 for any forgiven debt. That's about a $9,000 savings if it happens.

Less than 24 hours after our meeting, we got a viable offer on our house. $7,000 less than we're asking. I sent the offer to the attorney. We're scheduled to have a call with him this evening. We'll see where it goes. Regardless, things are looking much better for us than they were a week ago.

I've mentioned before that we don't have TV.

I'm at a conference, and am at a hotel. I had the TV on as I was getting ready this morning. There was a cheesy local car dealer commercial on.

Let's preface this by saying that over the past couple of years my thinking has been conditioned more by the SA site than by local car dealer commercials.

I heard the guy say something about no "crazy down payments". Then he said, "just $39!". So, either this guy sells $200 cars, or 20% is a crazy down payment. Sometimes I'm glad we don't have TV. Oh, and the political ads!

My grandparents gave me some Mercury dimes when I was young. I have 18 of them. They are not particularly nice Mercury dimes. None of them are rare mints.

I did some research on their value when I first graduated college, and was flat broke. I found out that their value was generally 2X face value, or about 20 cents each. I decided to hold on to them. Letting go of them was just not worth $3.60.

I did a little internet research recently, and found out, due to the price of silver, their melt value is around $2.40 each now, or $43.20 for the lot.

What to do? They sit in the top of my dresser drawer. They are not nice enough to display. All they ever were was pocket change. But, they were a gift from my grandparents. I don't particularly like the idea of selling those gifts for melt value.

I dug up CC information that I included in my first blog post. It included information from Nov. 2010. I compared it to my current credit card balances, and monthly due. The bottom line is that during the past two years, we have paid off a whopping $17.9K in CC debt!

We have eliminated two CC's, and dramatically cut the interest rate on two other CC's (one was at 16.99%, and has been transferred twice to 0.00% cards, and the other reduced the APR from 12.9% to 8.9%).

Our monthly minimum due has dropped from $990 to $250. In Nov. 2010, about $190 was going toward interest. This month, we will spend $24 on CC interest (still too much!). We didn't have two thin dimes to rub together at the end of the month two years ago.

It's been a long hill to climb, and the climb isn't over, but the terrain is a lot flatter now.

I dug up CC information that I included in my first blog post. It includes information from Nov. 2010. I compared it to our current credit card balances, and monthly due. The bottom line is that during the past two years, we have paid off a whopping $17.9K in CC debt!

Two years ago, we were obligated to pay a minimum of $990 toward CC debt. And, $190 was paid in interest. This month, we will pay $24 in CC interest, and that's still too much.

Two of our CCs have been paid off. A third was at 16.99% two years ago, and its balance has been transferred to three different 0.00% cards. Another CC had its APR dropped from 12.9% to 8.9%. Our income is up a bit, and we have had reliable renters for about 22 1/2 of those months, so clearly that's a big part of the solution. But, just as clearly, gaining control of where the dollars flow is huge.

Mort 1 $101,946
Mort 2 $65,660
CC1 $2,295
CC2 $1,251
CC3 PAID IN FULL
CC4 $1,041

Difference from last month: $844.

Not great, but I did stick $500 into our EF. Also, have I mentioned that CC3 is paid in full?

I've got the rest of October, plus Nov. and Dec. to get CC4 paid off before the crushing 23.99% APR hits. I'll be making minimum payments on CC1 (8.9% APR) until that happens. Then, all efforts will be made to slay CC1 by next March.

Tomorrow is the final work day of the month, so it's pay day. October also marks the anniversary of my family's becoming serious about turning finances around. This October will mark two years. Two years ago, we had about 24K in unsecured credit card debt. Now, we have about 5K. Paradoxically, it's much harder to allocate the same amount of money to debt reduction, because we had no choice two years ago. Our minimum monthly required on CC debt was about $750 two years ago, and now it's $250.

So, we keep plugging along, with the goal of having all credit card debt retired in May, 2013.

One of my CCs will also be retired after the October payment clears! At its height, it was a $9,770 debt. I might buy a 20 oz. Mountain Dew to celebrate.

I thinking about a new pickup. Something compact, like a Dakota, S-10, or Ranger. I'm not particular to makes.

This purchase wouldn't be until after December, when that one credit card that will shoot up to 23% APR is paid off. Then we'll be in the midst of winter heating, and post-Christmas financial trauma, so maybe not til next spring. We'll see.

I bought my current car from my aunt and uncle for a dollar last May. It runs OK. It's a 1997 Mazda 626. It has about 200K miles, so I can't ask for much from it. Of course we also have the family mini van that we recently paid off with adoption subsidy money. That's seven years old, and had 110K miles. It should last another 3-5 or more years, but we'll see.

So I started with the rule that I learned in the SA forums - monthly payment of no more than 10% of your monthly pay, financed for no more than 3 years. I cut the monthly payment in half, because it is possible that we would need to replace the mini van in that time frame. What I came up with is between 9 and 10K for a pick up.

A really quick look at KBB told me that I could buy a 2007 or so model with somewhere north of 120K miles. Not great, but a step up. And, having a pickup, especially in the country is nice.

So, I'm at least four months away from the purchase. Gives me time to possibly save some money, which will either get me a better pickup, or reduce my monthly payment. I can also spend that time becoming familiar with what's out there in my price range.

Yes, this does mean more debt. But, using the 10%, three year rule, I'm at least entering it with some reasonable restraints.

At the age of 65, and after 32 years of service to his company, my my dad retired last month.

About two week, or so, before he retired, I had talked with one of his co-workers, Duane. Duane asked me if I had been planning to throw him a retirement party. Honestly, the thought had not crossed my mind. Duane assured me that my dad's company would throw in some money. He encouraged me to look into it.

Shortly after dad did retire, I called his company. The man I talked with said that the company would allocate $250 toward the party. That was an amount we could work with.

Dad worked in the dairy industry, and my DW is from a dairy farm, so we decided to go with an ice cream social. We ordered 3 - 3 gallon containers of ice cream ($90). Two were French vanilla, and the other was pumpkin. We reserved a pavilion at a local park ($65). The rest of the money was spent on toppings (strawberries, chocolate syrup, bananas, sprinkles, etc.), decorations, milk, ice, and tableware. We ended up spending about $290, and were happy to cover the $40 overage.

The party was yesterday. We figure about 75 people attended. We had beautiful weather in September for an outside venue. Most importantly, my dad really enjoyed himself. And, $3.87 per participant isn't bad. Let's also say that my family will have enough chocolate syrup to last us a few months!

I've been doing a bit of thinking about retirement. Maybe it's because my parents are retiring right now. Maybe it's because I'll be turning 40 in a couple of months. Another big part is that we've turned the corner on our massive debt problem, and positive financial growth seems much more real now.

Anyway, retirement for me is still another 20+ years away. But, as far as that goes, 20 years ago I was a sophomore in college.

Anyway, there are two big unknowns in developing a solid plan. The first is - what is critical mass?

So, what will my spending be in 20 years? Dunno. I can project salary increases based on some conservative raise figure. Then take 80% of that? I won't be paying a mortgage by then. I hope not, anyway. Some say you need 25X spending. But, I think that assumes 4% draw down, and 4% growth, so you end up with the same amount you started out with. I'd rather start out with a figure and assume conservative growth, and somewhat liberal spending. If growth minus spending takes me to 100 years old, and the number at the end is positive, I figure I've done alright. The figure I've tentatively reached is $1.13 mil. But, that assumes SS income. Which, brings me to question 2!

Will Social Security be around 20, 30, 40, 50 years from now? My guess is yes, but it also seems like a good idea to figure that it won't be. That scenario has me working another 2 1/2 years, drawing less from the pot, and starting out with a figure closer to $1.3 mil.

Obviously, the SS question will be much clearer, for me anyway, 20 years from now. I have time to plan. But, maybe I should seek the advice of a professional on this one.

An Amish family moved down the road from my folks in 1992. I was in college at the time. Since then, three of their children have built houses in the neighborhood, and several other families have settled in the general area. So, I am acquainted with several Amish people, and know the local family quite well.

I'll also add the caveat that Amish people depend on English people (that is their name for all non-Amish Americans) for lots of things, including medical technology, roads, long distance transportation, and yes, our banks. I've heard that some Amish communities are self financed, that is, all borrowing is within the community. But, my sense is that most Amish communities, and at least the one closest to my home, borrow money from the bank just like you and I do. And, this recent credit crunch has also shown that some Amish over extend themselves just like the rest of us.

But, for the most part, Amish people are very self reliant. With the exception of their shoes, and male Sunday hats, pretty much everything they wear is made at home. A lot of what they eat is raised at home either in the barn, in the garden, or shot in the woods. Yes, you do see Amish shopping at the local grocery stores, but they aren't buying Doritos. A substantial part of their commerce is done within the community. They buy buggies, tarps, shoes, tools, building materials, cloth, and other necessities from Amish vendors. You do see them shopping at Wal Mart, but they're not buying a flat screen TV. My guess is that most Amish men who work away from home make somewhere in the 25K per year range, and manage, with their wives who make nothing away from the home, to care for, clothe and feed 6-12 children. They live cheap.

There is a "buy local" and "eat local" movement among some in our society. But, most of us don't live up to it. And, I'm certainly not suggesting that everyone make their own clothes, and grow and can 80% of what we eat, and, I really like my car, electricity and indoor plumbing. But, it seems that if more of us tried to be a bit more self-reliant, a bit closer to home on mores stuff, and a bit more neighborly, we'd be a bit better off.

Last month I posted that we were considering getting satellite TV again. We've made our decision - we're not getting it.

While the monthly cost was a factor, that wasn't the main driver. The primary reason is our kids. They don't need it. The crap that's marketed to them via TV. The crap that's on TV. Our kids aren't even bugging us to get TV. So, why would we?

Clearly, we're saving money by not getting satellite again. That's great. And I miss some aspects of TV. But, we just don't need it.

Current balances on all outstanding debts:

Mort 1 $102,153
Mort 2 $65,870
CC1 $2,324
CC2 $1,387
CC3 $194
CC4 $1,109

Difference from last month: $1,118!

CC3 will be paid off next month, then that payment will be shifted to CC4, to be paid off before the end of the year.

My total credit card interest expense for the month will be $24. Less than a dollar a day. I'm really happy with that number. My goal is for it to be zero by next June.

We bought a stove this past weekend. A nice glass top stove. Not the nicest, and not the cheapest. It set us back about $750, taxes included.

To start the story at the beginning, our glass topped stove broke about two years ago. The oven still worked, and three of the four burners on the stove worked, but the biggest burner, the one that could work at two sizes, was cracked, so we couldn't use it. We'd used a three burner stove since.

Well I tried to "fix" it last week, only making it worse. We had the money in our EF, so we bought a new one. It has some nice features that our old one didn't. "Turbo Boil" (gets hotter to boil, say spaghetti water, faster), a warming spot (a fifth burner that is super low heat to keep things warm when they're done), and a probe for constantly measuring internal temperatures of meat. Things that we have done fine without, but are nice.

Most importantly - we didn't go in debt! We cash flowed the purchase. Sure, our EF took a hit, and that money is gone, never to be seen again. But, we have no more debt than we did a week ago, and we have a new stove!

I should add that the oven on the old unit was starting to go bad. Things were taking longer to bake. Sure, we probably could have changed the element, but that whole three burner thing was getting old.

My retirement fund is at six digits. Today. And, just barely. I was close the last time the markets boomed, but didn't quite get there.

A year ago, I reported on this blog that for every dollar I had invested in retirement, I owed 20 cents in credit card debt. Today, for every dollar I have invested in retirement, I owe 6 cents in credit card debt. Six years ago, that was a one to one ratio.

On the personal side, my youngest daughter sprained her ankle a couple of days ago. I took her to a playground while DW was at an appointment. It isn't a very nice playground, and the traffic compacted track around the merry-go-round has tree roots growing in it. She tripped on one of the tree roots. So, it just goes to show that there is a reason for the extreme and expensive safety measures at the modern play grounds.

August 2012 Debt
Mort 1 $102,359
Mort 2 $66,080
CC1 $2,384
CC2 $1,522
CC3 $387
CC4 $1,508
Van Loan $0

Difference from June = $10,139. Thank you Adoption Credit!

My current focus is to retire CC4 before December 31, when it shoots up to 22.99% APR. I'll have to make average monthly payments of $377 to make that happen.

We cancelled our TV satellite service about two years ago. We cancelled it because we could no longer afford to pay a monthly TV bill and reduce debt.

We're in a much better financial state than we were two years ago. We can now afford to pay a monthly TV bill, and continue to make substantial steps toward reducing debt. The question is - should we?

We have found life without TV to be not only acceptable, but in many ways preferable. The kids no longer fight about what's on the TV. The TV is not constantly on, rotting our brains. We have an extra $60 per month to allocate somewhere else. Most of what's on TV is crap anyway.

We are missing the Olympics. And I miss the Big 10 network and NCAA tournament coverage most of all (Go MSU!). And sometimes, if used properly, it can give you a parenting break. (The same old DVDs get tiring after a while).

So, we're considering whether or not we should re-up with our satellite TV service. And, getting the cheapest, most basic service is not appealing to me Like I said, the Big 10 network is part of the deal.

What do you all think?

Hey,

I've been inactive for quite some time, but I wanted to let you all know that our 13K federal adoption tax credit arrived in the mail this week, with interest. We deposited it, and the check cleared yesterday. Today we paid bills! $2,500 went to pay off our new front porch, $2,000 went to one of the credit cards, $5,000 paid off our van, $2,200 went to family members for Mort 2, and the rest went to our EF. Sure feels good!

Some of you may be tempted to critique how the money was spent. Please don't. (ie, more should have gone toward high interest credit cards) This was a balance of my wishes, DW's wishes, and sending money to family members with whom we have loans. Trust me, I know that paying off higher interest accounts makes more purely financial sense, but we feel an obligation to accelerate progress on family loans.

Remember how in the early spring I blogged about building a fence in the front yard for a play area for our boys? Well we've been using that fenced area. A lot. The fence connects to the our front door porch. The porch is about 80 years old. The constant use of the porch/fenced area has led to rapid deterioration of the porch. It is no longer safe. It needs to be replaced.

The bid for replacement is $4,500. I had $4K in my mind before we got the bid back, so it's close. We trust the contractor, so we're going with his bid.

He figures he can do the work the week after next, and it will take about 4 days. Until then, no fence for us.

I went through monthly spending and categorized the totals. I came up with the following:

Amount spent on:

Housing - 22%
Other Needs - 35%
Wants - 12%
Savings - 10%
Debt Repayment (or largely past wants) - 20%

According to Disney Steve in the forums the benchmark is 50% Needs, 30% Wants, and 20% Savings. In those terms my breakdown would be:

57% Needs
32% Wants
10% Savings

I've copied below something I just posted in the forums for those of you who don't frequent them.

I've posted about my situation from time to time, but I'll start with a brief refresher.

I took a job closer to where I grew up 4 1/2 years ago. We put our house on the market as we were moving. The value of the house has done nothing but drop since we moved. About a year after we moved we had an opportunity to move into my family's original farmstead home. We borrowed 70K from family members (30K from my aunt/uncle and 40K from DW's parents) to renovate the house. The original agreement was to pay back family after we sold our other home. Just during the last 4 months we have begun to pay them back slowly. $90/mo. to aunt/uncle and $120/mo. to in-laws. These are interest-free loans.

During this time we have had three different families rent our original house. At no time has rent matched our $1,026 monthly mortgage payment. The current renters expressed interest in buying the house when they moved in last July. We were going to rent the house for $800/mo., but we reached an agreement where we collected $900/mo., and the extra $100/mo. was their cost for us to take the house off the market for a year, to give them time to save/line up financing.

To no one's surprise, the renters are not in a position to buy the house. So, we reduced rent back to $800, and put the house on the market. We listed it for $69.9K, or 1/2 of what we bought it for in 2005. As far as I can tell, this price is reasonably close to market value. It's hard to tell because the market is so slow, There aren't really any comps. We owe $103K on the house. This will leave us in a short sale situation.

Here are my 4 options as I see them:

1. Continue renting the house at a loss until the market turns around, and we can sell the house for what we owe on it (that was our strategy up until now).

2. Continue paying the mortgage. Go the short sale route.

3. Quit paying the mortgage. See what happens first - foreclosure or the house sells as a short sale.

4. Get a commercial loan against the house we're living in. Set aside $30 - $35K to make up the difference between what we owe and what the house will sell for.

I'm honestly leaning very heavily toward option 3. Be done with it, and let the chips fall where they may. As I understand it, our credit will be trashed whether we go option 2 or 3.

My aunt has expressed her interest in helping us out. So, option 4 is possible. We would owe her a lot of money for a long time. I hate the idea of that, and hate the idea of not meeting our mortgage obligations.

We are working on getting a commercial mortgage on the house we're living in. The question will really be - should that money go to family, or be put on hold to shore up the difference when house 1 sells.

I've posted very recently about my other debts, but in case you are interested:

We owe about $7.4K in credit cards
We owe about $5.2K in a vehicle loan
Monthly net income is about $5.4K
Small $1.1K emergency fund