I work in 2 industries – healthcare and finance. I’ve owned, for the last 15 years, a very successful regional auto finance company. the company owes 4.3 MM on a loan for a portfolio we are liquidating.
At one time we would sell portfolios but no one is buying in this climate (even prior to COVID) in 3 years we paid down 9.9 MM and nearly 2MM in interest.
The loan was set to renew in Feb (delayed with COVID) with terms that were tough but manageable. Now the bank wants to still renew on those terms our cash flow is off by over 40% and we can no longer handle those terms but the bank is pushing.
Like most small business owner my business partner and I (50/50) had to sign PG’s on the loans – the only personal debts I have are a mortgage and car notes.
I have a very high income and substantial equity in my home but not enough to pay off the loans personally.
Plus if I file bankruptcy loans for my other companies would probably be pulled. What happens to PGs [personal guarantees] in chapter 13. Also, my attorneys have not gotten involved with the lender yet and can not believe they are not making adjustments when 80% of our customers lost their jobs.
I never had depression in my life but I now feel like a paper bag in the wind. personally, we have no financial issues so I haven’t shared what’s happening with my wife or family there is nothing they can do so I don’t want them stressing right now the world is crazy enough.
I only bring this up because your articles have pulled me from the edge. Thank you.
Dealing with debt is traumatic and for people that have been high flyers in the past, the fall from that height can be exponentially traumatic.
First off, thank you for trusting me enough to reach out and submit your question. Just asking for help can be a huge hurdle that is tough to cross.
My advice starting point might surprise you. Before we ever consider the math of the situation the two most important components we need to tackle are your mental health and the family.
I would urge you to make an immediate appointment with your family doctor and go talk to them about the depression. It is a kind of chicken or egg situation with debt and depression. Depression makes it much, much harder to deal with the debt but the debt drives you down in depression. The depression makes it substantially much harder to find your way out and take action.
Start a treatment plan for your depression in conjunction with your doctor and you will find the fog lifting and be able to deal with the current situation.
Second, this is just my personal opinion, I think you should include your wife in the reality of the current situation. Trying to hide it from her and your family simply increases your stress and anxiety and amplifies your depression, without altering the situation.
I’ve seen two reactions from letting your loved ones know what the current financial reality is. Most often people are appreciative of telling them the truth and letting them be a part of working as a team towards a solution.
In a minority of situations, I’ve had a wife say if she can’t live the lifestyle she expects, she’s leaving. I’ve seen some situations where the kids are just obnoxious entitled brats.
If anything, the adversity of the situation can help you to clearly see the true character of family members. When it comes to the kids, maybe that is a great teachable moment to help them be better people.
People up and down the financial food chain are getting pressured these days. So it’s not that surprising the bank is not more understanding.
However, you do have options if you start treatment for the depression, reduce your stress and fear of shame at home, and consult with some reorganization experts.
The reason lenders ask for personal guarantees is so they can go after your personal assets if the business fails.
You’ve asked some good questions about what will happen in a bankruptcy situation but I think we might be a bit cart before the horse.
Before we decide what the solution is I think you first need an assessment about the overall situation.
And your attorney might not be the best person to negotiate with the lender if this is not his or her area of expertise. There are attorneys that specialize in just this sort of negotiation.
So my step three would be to talk to my debt coach friend Damon Day. I feel like you need to talk to Damon Day because talking through the financial pieces will be a faster way to wade through the situation. Damon knows attorneys that specialize in these types of negotiations to help soften the impact of the PGs.
Once we get through that step and negotiations are not going to do the job, then there are other options like even a Chapter 11 bankruptcy. But before you leap at a particular bankruptcy solution you should consult with a business bankruptcy attorney to discuss your options. You should take the advice the business bankruptcy attorney offers and walk away for a few days to ponder what is best for you.
But if you do connect with Damon Day, he will be an exceptional debt expert to be a sounding board that can help you clearly see what path is best for you given the overall situation.