qofcc
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Joined: Dec 20, 2010 13:30:58 GMT -5
Posts: 1,869
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Post by qofcc on Mar 23, 2020 12:25:37 GMT -5
My advice, based on personal history, would be to tell them to stop paying on the unsecured debt. The credit card companies can't do anything to you. Eventually, they can sell the bad debt and some slimy collection company can get a judgement or you can try to settle first, but it takes a year or more to get to that point. That's basically what I told them. I think they need to work on saving as much as they can to try to settle later rather than continuing to make payments. They'll need to figure out how to negotiate the settlement and I think they should contact the card companies before they are 30 days late and get reported to the credit bureau. It's pretty obvious they're going to fail.
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qofcc
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Joined: Dec 20, 2010 13:30:58 GMT -5
Posts: 1,869
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Post by qofcc on Mar 23, 2020 12:35:15 GMT -5
Agree that it needs to be multiple years. Part of the OP was about expanding the business, and about how they took a loss this year after depreciation. That doesn't really tell us a lot about the overall business. It's difficult/impossible to tell how a business is actually doing when you only know the bottom line after the accounting is done but without seeing line items. There's a huge difference between a business just running as normal and not actually making any money. The same business running as normal and making sure the books say they didn't make any money. And a business that is expanding and may take a big accounting hit due to that re-investment/expansion in a given year. "How the business is doing" can be deconstructed from the accounting of it, but not necessarily from a single number that is often intentionally manipulated to give a skewed view to outsiders like the IRS. Last summer was the most profitable summer ever. They thought they were on track to have a profitable summer this year and were working on how to make more money in the slow times. The contractor they subcontract for had at least one job pending and others being negotiated that were put on hold when everyone was shut down temporarily by the govt. If they cancel the insurance, that contractor will take them off the approved subcontractor list and give the work to someone else if/when they are allowed to resume. I told them to call the insurance company and see if there was a way to pause the liability insurance instead of cancelling it.
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Rukh O'Rorke
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Joined: Jul 4, 2016 13:31:15 GMT -5
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Post by Rukh O'Rorke on Mar 23, 2020 12:45:03 GMT -5
when you said they had a loss last year - was that 2019? Not understanding a profitable summer and yearly loss?
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qofcc
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Joined: Dec 20, 2010 13:30:58 GMT -5
Posts: 1,869
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Post by qofcc on Mar 23, 2020 13:18:57 GMT -5
The husband had run a profitable business for years that became unprofitable due to changes in the market and a lower priced competitor. They didn't go out and buy a new business, this was an accumulation over a few years of trying different things to turn the business around and expand in related areas and a huge loss on an investment that lost value in that neighborhood due to flooding in the area. They seem pretty frugal in their personal purchases but it seems like they had a combination of bad business decisions and bad luck. They financed the purchases on credit cards at low or zero balance transfers. Some is still at very low rates but some of the promo rates ran out then their ratios were too bad to get another transfer. Given what they know now, I don't think he's ever going to be profitable like he was during the housing boom. The house was his before they met. They seem happily married although really stressed about finances. I'm not going to get involved in their relationship, I'm just trying to help them do some financial planning to keep a bad situation from getting worse.
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qofcc
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Joined: Dec 20, 2010 13:30:58 GMT -5
Posts: 1,869
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Post by qofcc on Mar 23, 2020 13:26:27 GMT -5
when you said they had a loss last year - was that 2019? Not understanding a profitable summer and yearly loss? They made a profit in the summer and used it to pay down debt. Business slowed down in the fall/winter and an opportunity they pursued for the business didn't result in the promised work. They showed a loss after depreciation. If you subtract depreciation, mileage, phones, internet, etc (all the stuff business owners can deduct and people with paychecks can't) He probably made $25-30K for the year for the last few years.
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