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Tractor Talk Discussion Forum

Re: What would you do? Opinions please

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JD Seller

01-19-2013 19:35:08

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LAA the tractor is HIS DAD's until the bank takes it back. All I am wanting to do is get the tractor back in the family's control. Then deal with the bank.

As for the father declaring bankruptcy. In the long term he and the bank will be better off to solve the problem the best they can NOW, not drag it out for years and years.

I was on a local banks loan board for many years. We had a guy that we had to foreclose on. HE mainly just hit a string of bad luck that put him under. HE refused to take bankruptcy. So he forced the bank to keep the loans open. He forfeited all the secured collateral plus sold everything else. There still is over $800,000 dollars left owed to the bank. This is the old principal amount and back interest. The loan's interest rate was a fixed rate loan from the early 1990s. It is locked in at 12%. So that is $96,000 dollars each year in interest only. HE will never be able to pay it off. Plus it is dragging him down from ever getting ahead. He pays maybe $4000-5000 on it each year out of his town job. Now the hard thing for many to understand. Since he is still making a small payment the bank can not write off the loan. So it show on their books. Every time they are audited by the FDIC they are questioned about this bad loan. It also messes up their foreclosure ratio at the FDIC. So the few dollars he sends them each year is actually costing the bank money. If they could write it off they could use that loss to off set some income for tax porpoises and then actually have more funds to re-loan.

Also the money he borrowed/lost years ago did not just disappear. Those dollars went back into the economy. HE spent them buying things or services. So they are in circulation.

As far as him mortgaging that old tractor. These days if you are borrowing general operating money you are going to sign a BLANKET mortgage on all of your personal real property and equipment. Even the 20 or fifty year old stuff.

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01-19-2013 22:56:35

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 Re: What would you do? Opinions please in reply to JD Seller, 01-19-2013 19:35:08  
JD Seller -- we have widely different beliefs on the whole process from start to finish, first and foremeost, in my world, there is no such thing as an ""operating"" loan, if I can"t afford to plant a crop or buy livestock I will do something different until I can pay the inputs out of pocket, especially after many years in the business. The only debt I will incur is a mortgage for more land, with ample money down so that the land stands the full nut with no additional collateral and the purchase has to make sense from a potential production standpoint, if it won"t pay itself out in a reasonable number of years then I don"t need or want it. Debt is the cause of most peoples troubles, not the cure. Both of my sons are building their respective operations under these same pricipals that have worked for my Father, Grandfather, Uncles, Brother, cousins and myself as far back as any of us can recall.

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