Boat owners have a slightly different situation than many others caught in this declining economy. The boat is typically not an income producer, nor a necessity like a home or a car. It is an expensive toy.

The cost of running a boat is high, the gasoline, increased insurance, docking and other operational expenses are expensive. With lost jobs and reduced revenues, many previously highly paid executives and profitable business owners are now without their above-average incomes and expense accounts and are left holding these expensive toys, unable to satisfy the debt service and operational requirements. They are seemingly stuck with them, as current fair market value liquidation values are well below the current debt on many boats. These are luxury items and tend to be amongst the first to go, if possible.

The same principles apply to this upside down situation as to other similar upside down debt we find on homes and business debt revolving around declining asset value. A short sale is the answer, with the bank taking the ultimate hit as they do in other workout situations.

The issue is that people in this situation are not used to thinking a workout is their answer as months before they were in much higher income and revenue brackets and flush with cash and expense accounts and very accustomed to paying their bills on time and completely. Now, many of these executive positions and businesses are being eliminated and revenue has come to a stop, unexpectedly and abruptly. Yet the boat payments remain a monthly fixture.

Sell the boat short and workout the shortfall debt. Understand, however, it may also be impossible to sell short at a “reasonable” price as there may not be a market for it at all, even at depressed values, making the situation even more grim. Yet the rule is everything goes at some price, so how short is short? That’s a factor for each boat owner to determine and each lender to absorb. The strategy remains the same even if the number changes. There is a liquidation price for every boat, one must merely determine what that price may be. For these reasons, expensive boats – typically not an area known for workouts – are now ripe for this procedure.

Chances are if you are in this situation, there are many other problems looming in the background and this may be the moment to complete a review and create a strategy that resolves all the issues at once giving you control over your debt and protection over your assets. Things happen, this we all know. It is important to understand the options available to you. Call me.