The bank threw DH a bone

[lisac77]

Some of you are familiar with our situation, but I'll recap it here in case you arent. ANY advice is welcome, we are really in a bind here.

DH and I own a failing business. He was shot in an armed robbery in November. We lost a lot of money after the shooting because DH had to take a few days off to recover. It's also the holiday season, and things have been really slow. The upshot is that we don't have enough money to pay the business bills anymore.

After the shooting, I felt that bankruptcy was our best option. I looked into it, at DH's request, for the first time (DH has been wanting to file bankruptcy since the business was a few months old, he is literally killing himself trying to keep it going, I was previously opposed to it) in December. I talked to lawyers, found this forum, and quickly realized that bankruptcy is the BEST scenario for us, not the worst as I had feared.

We already own a home, and we own our cars free and clear. Those are the two things that people usually need excellent credit for - we've already got them. We also have some credit card debt that I ran up just buying necessities while DH worked for free at his business.

DH is not making a dime at this business. He wants to try to sell it to preserve our credit. I argue that credit is rebuildable, and we'll still have the house and the mortgage, which will help our credit situation enormously.

We sent a letter to the bank that holds the main business loan last month telling them that we could no longer make the payments and we wanted to discuss transferring the assets back over to them. They called DH yesterday and told him that they would give him 3 months of interest-only payments to try and give him a chance to sell the business. Of course, this is what he wants to do, and he was overjoyed. He came home and told me and I went ballistic.

I do not see a sale at cost to be beneficial to us in any way. We have a few things in this scenario that are time critical, and waiting 3 months is not going to help us at all.

Scenario 1:
We file bankruptcy in February.
We keep the house.
We keep two cars and all of our household belongings.
All business property is turned over to the bank.
Credit card debt is erased.
DH is free to get another job right away.
I have bonuses coming in Feb and March, substantial ones, so we would have cash right away.
We lose about $1000 from a tax refund (will be taken by the bankruptcy trustee).
All is said and done in just a few months.

Scenario 2:
The business sells at cost in the next three months.
We won't have to file bankruptcy.
We will still have the credit card debt.
We will be able to keep my bonuses and $1000 in a tax refund.
DH will put off finding a job until after the sale (so no income for a few months).
We won't make any money on the sale. It's a wash, financially.

Scenario 3:
The business DOESN'T sell in the next 3 months.
We will have to file bankruptcy.
Our credit cards will be erased.
All business assets will be turned back over to the bank.
We keep the house, cars, and all belongings.
My bonuses will have come in and will become part of the bankruptcy estate. It is highly likely that we will lose all or part of the bonuses to the bankruptcy trustee (he will take the money to settle our debts).
We are 3 months behind in DH finding gainful employment.

The bank is throwing DH a bone with the interest only payments, but I think they are stringing him along. Bankruptcy is the last thing they want us to do. However, the payments for the business are about 75% interest, they are really huge even when you knock off the equity payment. We also haven't paid the other business loan in 3 months. They're not going to be happy about being left swinging in the wind.

Also, it gives the bank a heads-up that we are insolvent and they could bring a lawsuit and slap us with a judgement at any time. I think they will likely be ready to sue us on April 1st, if not before.

I think the business sale is a long shot, DH thinks that it is a sure thing. I think he is deeply mistaken.

I am trying to take a step back here. Maybe I am wrong, and BK is not our best option. I am trying to see it DH's way, but unfortunately I think he is irrationally tied up in this situation and he is not thinking clearly.

I feel that the business is a sinking ship and it is far more beneficial to us to file bankruptcy early and get a fresh start.

[no_it_all]

Just a couple of things: Paying one loan (business loan) and not another can be viewed as preferential treatment and you may have some issues with that if you later decide to go BK

As you pointed out, since most of the business loan payment is interest, an interest only loan is not really a significant savings.

You make a very good argument for declaring BK now, and not three or four months from now. A clear head and logical thinking is most important right now, not business ownership dreams....good luck!

[HHM]

I agree, you don't gain anything out of selling the business. Now, if you could profit from the sale, that would be one thing, but that doesn't sound realistic.

I really see no benefit in prolonging the inevitable.

[SinkingFast]

As you pointed out, it seems you are standing in front of 3 doors on "Let's Make a Deal" trying to decide which door to choose. One door has the car behind it, but which one is the question.

Draw a line in the sand now and decide what you are going to do. You cannot plan on what might or might not happen. You have to deal with what you know for sure.

The business,......... Is not a revenue producer. It's a financial drain. It might or it might not sell. Waiting for the business to sell is looking for birds in the bush. You don't have a bird in your hands.

The bonuses are supposed to come. Hubby was supposed to get a raise on 12/01 but he didn't. The company decided to wait until performance reports from the year end came in before awarding raises. Your company may experience some similar situation. The bonuses are birds in the bush too. But if the bonuses do come then you create a whole different set of problems regarding filing BK later.

Where you are today is in debt with a dead in the water business that's dragging you deeper into the hole. If you are gonna swim and not sink, you've got to cut the dead weight.

JMHO.

Make a plan based on what you do know and move forward. Don't think about what could be, would be. It may never come to fruition.

[Spartan]

I think Lisac77 knows the choice to make. The problem is with the spouse....

The bank wants to have the cake and eat it too. They get to collect 3 months of interest, and you get to sell the business for them, at your expense.

IF you file, they get stuck with the business which they have to sell themselves, if they can.

[lisac77]

I think Lisac77 knows the choice to make. The problem is with the spouse....

The bank wants to have the cake and eat it too. They get to collect 3 months of interest, and you get to sell the business for them, at your expense.

IF you file, they get stuck with the business which they have to sell themselves, if they can.

Spartan, this is what I think too. They are screwing us in this scenario.

I was just trying to see if I am way off base with my thinking. It doesn't seem so. It is an obvious choice, in my opinion.

It's only a matter of time before the non-payments start showing up on our credit report, too. That is going to kill our credit rating. I just don't see how he thinks he will protect his credit rating in this scenario. The smaller business loan is 3 months in arrears now. They are a secured lender. This is nuts.

[Spartan]

I think the consensus is to bite the bullet and file, and then rebuild. Given your financial situation and your income level, rebuilding is a walk in the park.


I probably shouldn't say anything about this...

If he was just a bf, I would say dump him.. but he is the father of your children....

He got the business, against your wishes and thinking.. And now, he is at it again..

I dunno.. I have very low tolerance for people repeating the same mistake over and over again...


I realize that we shouldn't be saying things like this to spouses.. So, I am sorry if I am out of line here. But it just bugs the hell out of me.



P.S.. Maybe you should get him to come to this forum and after reading around a bit, he will realize that rebuilding is rather easy, for people in your family's situation.

[Brendon]

Also Remember that selling ANY business in 3 months is a stretch, much less one that is not producing money....

You can talk to a business broker (if you haven't already) and see if one would even consider taking the business and trying to sell it.. This was certainly a reality check for me. I was told by all but one that unless a business is making money and providing income for the owners, they won't even touch it.

Trying to sell a successful business will take longer than 3 months. If you need recommendations for business brokers in your area I can provide you a list of some of the ones I talked to in. Just PM me, I don't know if we are allowed to post names & numbers of reccomendations on the forum.

good luck with your decisions.

[Grace]

I know you've posted many threads about your situation, so I apologize if I get something wrong.

You have a nanny, correct? That must mean that you work outside the home as well. What is your income? Can it cover the credit card debt you've incurred?

I know your husband was shot on the job. Hopefully he carried disability insurance to cover the lost income. If not, you need to keep that in mind if you guys go down this road again. How long has he been out of work with the business completely closed down? Was all the credit card debt incurred as the result of his lost income? I thought the business wasn't turning much of a profit.

Is this business located in a high crime area of the city that would hinder its sale? If so, your best bet might be to file bankruptcy. If not, why not consider the possibility of selling? From this thread, it sounds like you have a lot of other debt that you'd like to get rid of besides the business. If that's the case, then you should file. The bank may not be aware of your other personal debt.

I read one of your other posts about continuing to pay the nanny so your husband can continue to recuperate and look for a job. Would paying her another 3 months be so detrimental to your finances that it would be better to file bankruptcy right now than to try to sell the business? Or has something changed since you posted that?

Why not take a couple of weeks and investigate the option of selling the business? You don't need to take the whole 3 months. How long was it for sale before you purchased it? How long have you owned it? Talk to someone who could help facilitate the sale.

Why file bankruptcy unless you have absolutely no choice? It sounds like you guys have been given an opportunity to pull yourselves out of this.

[lisac77]

If he was just a bf, I would say dump him.. but he is the father of your children....

He got the business, against your wishes and thinking.. And now, he is at it again..

I dunno.. I have very low tolerance for people repeating the same mistake over and over again...


I realize that we shouldn't be saying things like this to spouses.. So, I am sorry if I am out of line here. But it just bugs the hell out of me.

Oh believe me it bugs the hell out of me too. Thing is, we have a very young child (3 years old) and I can't afford to live in the house on just my income AND pay for childcare. That's been the problem I've had for the last couple of years. I don't want to move. I don't want an expensive divorce. So I live with it, but really, it drives me completely nuts. He is a very smart person - but book smart. No common sense, no sense of how things will be in the future. He deals exclusively in the here and now.

Also Remember that selling ANY business in 3 months is a stretch, much less one that is not producing money....

You can talk to a business broker (if you haven't already) and see if one would even consider taking the business and trying to sell it.. This was certainly a reality check for me. I was told by all but one that unless a business is making money and providing income for the owners, they won't even touch it.

Trying to sell a successful business will take longer than 3 months. If you need recommendations for business brokers in your area I can provide you a list of some of the ones I talked to in. Just PM me, I don't know if we are allowed to post names & numbers of reccomendations on the forum.

good luck with your decisions.

I know. We've spoken with several brokers. We're actually listed with one of them. They are not trying to sell the store, because honestly, who would buy a store that is in the red, in an area that is declining? It makes no sense. No serious business person would be interested in this place.

[Grace]

They are not trying to sell the store, because honestly, who would buy a store that is in the red, in an area that is declining? It makes no sense. No serious business person would be interested in this place.

Did the decline happen shortly after you purchased? What changed in the area? If zoning changes or other such changes were made after you purchased the business, you might have a case against the municipality in which the business is located. I'm sure the city or other entity would be interested to hear what happened to a previously thriving business. Communities need to support small business owners. Engage any resources you can.

[lisac77]

I know you've posted many threads about your situation, so I apologize if I get something wrong.

That's OK, it's a complicated situation.

You have a nanny, correct? That must mean that you work outside the home as well. What is your income? Can it cover the credit card debt you've incurred?

We have a nanny that we can't afford. The reason we have a nanny is that I work evenings (3-11 PM) and my job is a stickler for attendance. It would not be cool if I had a child in daycare getting sick all the time. So having in home care is a necessity for us as long as I am the primary breadwinner and DH is unable to help care for DS at all. I have offered the option of me switching to day shift and putting DS in daycare, but DH really doesn't want him in daycare, but doesn't want to pay extra for the nanny either.

I make decent money, but with the cost of childcare, the amounts and minimums on the cards, and our house payment (a 15 year mortgage acquired when we were both working regular jobs - the higher payments were no problem then) I am out of money after paying all the bills. So no, if he is not making money, I cannot afford everything.

I know your husband was shot on the job. Hopefully he carried disability insurance to cover the lost income. If not, you need to keep that in mind if you guys go down this road again. How long has he been out of work with the business completely closed down? Was all the credit card debt incurred as the result of his lost income? I thought the business wasn't turning much of a profit.

The business has been in the red for the last 2 years. It makes no money. DH can't afford disability insurance, so that is out as well. He was out recovering for two full days. Our overhead at the business is so high, those two days were enough to make it impossible to pay the loan payments.

The credit card debt has been accrued over the time he has had the store, so over the last two years.

We have spoken with several brokers over the last year or so. It is next to impossible to sell a store that is not making any money.

And yes, I would like to get rid of the personal debt we have accrued due to DH's lack of income. Before we bought the business we were living debt free and had enough savings to invest in a business.

Why file bankruptcy unless you have absolutely no choice? It sounds like you guys have been given an opportunity to pull yourselves out of this.

DH has been extended a false hope by the bank. I do not think there is any way that the business will be sold, for enough to cover our loan amounts, in 3 months. We will also be out 3 more months of income that DH could make if he were working, AND we are essentially paying the bank to sell a business at our expense.

This IS our last resort. The business is dying.

[lisac77]

Did the decline happen shortly after you purchased? What changed in the area? If zoning changes or other such changes were made after you purchased the business, you might have a case against the municipality in which the business is located. I'm sure the city or other entity would be interested to hear what happened to a previously thriving business. Communities need to support small business owners. Engage any resources you can.

The vast apartment complex behind the store was converted in to Section 8 (subsidized) housing. Unfortunately that was when the problems started. Since then it has been broken into 4 times, and robbed once (when the shooting occurred). There is a strong possibility our insurance won't be renewed next year because of the break ins.

The property was vacant for 5 years before we bought it. And the business was never "thriving." We've been barely hanging on the entire time.

The police don't give a flying fig about safety at the store. After DH was shot they told him they weren't even going to look for the guy because they'd never find him. So much for community support.