Tennessee couple has $1.3M debt after a bad business deal. Dave Ramsey offers options to help couple recover
Heather from Nashville broke down when she called in to The Ramsey Show to tell co-hosts Dave Ramsey and Jade Warshaw about how she and her husband were “in way over [their] heads” because of a business loan.
Heather and her husband are both 28 years old, and after her husband lost his job four years ago and couldn't find steady work, they started their own business: a summer camp for kids.
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Now, they are $1.3 million in debt. They owe $48,000 on their home, which is worth about $250,000, plus they owe $17,000 on their cars, $30,000 in back taxes, and $19,000 in credit card debt.
The bulk of the debt, though, nearly $1.2 million, is a loan they took out to buy another business’ assets. Heather said that their summer camp business does well, bringing in about $200,000 a year. But the loan for the assets they bought from an event rental business — lighting, audio visual equipment and inflatables — is sinking them.
A bad deal that snowballed into seven-figure debt
Ramsey was incensed that Heather and her partner were able to get the loan from the Small Business Administration (SBA) in the first place. “Anybody that made this loan should be just lined up and shot. Oh my god, this is ridiculous,” Ramsey said.
He asked Heather whether they would be able to sell the assets for anywhere close to what they paid for them. She said they couldn’t because they realized later that they had been deceived and it was a bad deal — they had overpaid by about $400,000.
Before giving Heather his advice, he told her about his own experience when he was her age, when he “lost everything and ended up bankrupt.”
He said for Heather and her husband, “The worst case scenario is you lose the business, you lose the camp, and you start your lives fresh after a bankruptcy. And you hold on to each other.” He went on to say that “lots of people have gone broke,” but that it was important to keep their relationship strong.
Although Ramsey seemed like he might suggest that they have to file for bankruptcy, saying, “I don’t right now see how you’re getting out of this,” he gave Heather other options than bankruptcy to solve her problem.
“I would sell [the assets] for whatever you can get for it. If you can get $800,000 for it, take it. And go to the SBA and do a short sale. Hire an attorney and tell the SBA, ‘You get nothing, honey, if you don’t take this 800, cause I’m walking and you’re going to own a blow-up inflatable.’”
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