Your imput on dealing with a real bad debt situation

JOCCO

Well-known Member
Farm debt and tractors. Not me but I am slightly in the middle. One larger out fit I deal with is on the hook. The manager relies on me for some stuff including advice and handling some situations. A smaller farmer borrowed money (quite a bit) the intention was to pay it back soon, That did not happen. All the variables came in bad crops, equipment breakdowns, divorce, fire and so on. The bigger out fit kept lending money and securing it with junk equipment and crops.(I felt it should have stopped there banks and coops had shut him down) ALL 3 OF US BIG OUT FIT OWNER, SMALL FARMER AND ME were childhood friends we all grew up together. Well fast forward the smaller guy is probably going bankrupt. Land is in hock to the banks so they will get that. Unsure of his leased lands as the bigger out fit took some of it over to collect debt and keep him going. NOW THE REAL ISSUE our conversation was what to do how to proceed. His feelings were to just walk away and not fool with a bone pile of old trucks and tractors, etc. May be try to pick up some lease lands, write some debt off. Somehow we have all stayed on good terms the little guy even went to work for the larger outfit for harvest season, just to get a pay check. LOOKING FOR IMPUT FROM YOU GUYS ANYONE SEEN SIMILAR SITUATION? THANKS
 
If you borrow money you take the risk. It doesn't sound like the borrower intentionally took advantage, sometimes stuff happens. If there is no money, then there is not much you can do. Probly best to just move on and take your lumps. Hard to hold a grudge against someone for conditions beyond their control.
 
Well, I have seen collection issues and bankruptcy. Once he gets relief and lists the BTO, the BTO is pretty much out of luck. At my wife's court they won't let you sue him even if he did not list you as a creditor. I disagree with this and most courts in Michigan don't seem to look at it that way but that is the way they do it. If it were me, I would take his equipment if it were offered. I have one 9N Ford out behind the shed. That is exactly the way I got it.
 
About the only issue I could see was whether to try to recover a little by selling the equipment. I would think you should- It sounds like everyone is still getting along, and probably will continue to, if the debtor is working for the BTO. The bankrupt friend will think even less of himself if BTO doesn't think enough of the equipment to even try to realize something from it. Won't be too hard to get it all to a consignment auction, and just take what you get. Given the personal relationships here, at least try to leave the guy with his dignity.

As far as collecting anything from debtor, forget it. He'll surely have enough exemptions in bankruptcy to discharge the debt, and that, as they say, is that. If BTO has a perfected security interest in the machinery, he'll be able to sell it. Even if he doesn't, the court will probably abandon it to him if the debtor agrees.
 
A few yrs ago a farmer near me took bankruptcy, he never owmed land{parents land},never lost anything ,always drove newer vehicles, always took good vacations. Later the farm house burned to the ground. They then went into town and purchased a much nicer home than they had been living in and community set up for a donation fund. Needles to say I did not participate.
 
(quoted from post at 07:12:28 01/17/18) Farm debt and tractors. Not me but I am slightly in the middle. One larger out fit I deal with is on the hook. The manager relies on me for some stuff including advice and handling some situations. A smaller farmer borrowed money (quite a bit) the intention was to pay it back soon, That did not happen. All the variables came in bad crops, equipment breakdowns, divorce, fire and so on. The bigger out fit kept lending money and securing it with junk equipment and crops.(I felt it should have stopped there banks and coops had shut him down) ALL 3 OF US BIG OUT FIT OWNER, SMALL FARMER AND ME were childhood friends we all grew up together. Well fast forward the smaller guy is probably going bankrupt. Land is in hock to the banks so they will get that. Unsure of his leased lands as the bigger out fit took some of it over to collect debt and keep him going. NOW THE REAL ISSUE our conversation was what to do how to proceed. His feelings were to just walk away and not fool with a bone pile of old trucks and tractors, etc. May be try to pick up some lease lands, write some debt off. Somehow we have all stayed on good terms the little guy even went to work for the larger outfit for harvest season, just to get a pay check. LOOKING FOR IMPUT FROM YOU GUYS ANYONE SEEN SIMILAR SITUATION? THANKS
Money lending to friends has broken many a friendship. probably take this as a life learning lesson...sometimes people just cannot be helped.
 
If you personally loaned money then you have two choices. You can either write it off and attribute it as compassion to an old friend or get with a lawyer and see where you stand in the line of creditors. From what you have said it is hard to see where you stand at present unless you are trying to ask something else such as advising the subject of this inquiry.
 
dump what can and find another life, divorce and money from freinds,take farming down everytime usually. sounds like whole story not being told here. same senereo here in my area came to head last week 390acres sold auction next 390 in couple months
 
The court will decide what to do with the personal property as well as if the banks get the land or not. The court may just sell the land at auction and out of procedes pay banks their share. Most likely. And then if the bank is not satified with that they can bid on the property and possibly buy it but then they would only get the share of the proceds the court determins but they could own the land then and set on it untill they could sell it for what they want out of it.
 
I would get the paperwork in line, you can always settle on a payment, but best to get it in writing.
 
If he planning to ''walk away'' leaving his mess to be cleaned up by others and is not concerned with repaying a legitimate debt incurred by himself then he is a bum, plain and simple. I wouldn't waste one second worrying about what happens to him, the people he rooked are the injured parties.
 
Sounds like that is a different sutuation than this one. There is no mention of squandering money in the original post.
 
I hope you guys all remain friends, thats more important. As for the rest let it sort itself out. If I ever lent money to a friend I considered it a gift not a loan and a Thanks if it got paid back. My feelings are if I will lose a friend over not getting paid back I better not lend in first place. Life to short to hold grudges.

Joe
 
Joe, I echo your advise. He did not say what amount the loan was for, but my guess is that the friendship is worth more.. We only go round once in this world and our best possessions are family and friends. If this guy has already lost his family who does he have left. Loosing money farming is not like throwing it away on booze and loose women.
 
"May be try to pick up some lease lands, write some debt off."

If that has not panned out over several previous attempts, the odds are pretty good that it will not work well this time either. Does the little guy have some skills that would help him get a half-way good paying full time job either on-farm or off-farm?
 
Best advice yet. When you loan to a friend or family it is best to consider it a gift but only go as far as you can lose and not be bitter or resentful. Never put yourself into a bind especially if others are dependent on you for their feelings matter as well.
 
Two choices:
If you all are truly long-time friends, and IF you trust the guys word to try, then I would likely go out on a limb and try to create or ensure a situation where he could work his way out of debt.

HOWEVER.........I stopped messing with debt long, long ago! I pay as I go or I go without!
 
Could the little guy sell the equipment, junk and whatever else to help pay off some of the debt? Then he could rent out the land to someone and go get a job somewhere. Just guessing, I have no idea if that would work or not.
 
I've been a commercial industrial building contractor for the last 40+ years and I can tell you from experience that your friend has the right idea. Take what you can that is secured and instead of spending time, stress, and money (especially attorney fees), you're much better off to spend time taking care of business and just move on. I have lend money but only in amounts and to people that I wouldn't be upset if I didn't get paid back. If you need to have the loan repaid, send them to the bank. That's what they are for.
 
Most of that has already been tried and things just get worse. With big crops and prices and no other issues he would have been alright.
 
Cut your losses and walk away.
How much money do you pour into a bad investment before you realize that it is just money lost?

Remember this: the road to hell is paved with good intentions.
 
Ted ..... I'm not saying that all the other comments are bogus but your suggestion is one which I wouldn't argue with (plus maybe a reputable accountant). I realize of course that there are those of us who believe that all lawyers and other professionals are out to fleece you, but in this case that route would make most sense.
 
jimg.allentown- Best advice posted so far! "Cut you losses!"

I'm dealing in a situation right now that is looking like what I will have to do.

Best of luck.
 
Stick a fork in it. It's done. We have high input prices and low crop prices the next 18 months, maybe longer, if he is in that deep he won't get out.

What to do from here? If you stick more money in propping him up, you stand to lose whatever you put in.

If you can offer some opportunity for him at low risk to you, great.

If you walk away, could be hard on the friendship.

If you follow up with collection proceedings doesn't sound like there is much to collect on, likely really hard on the friendship.

Pick your poison.

Me, I would try to be supportive but walk away from dealings with him, farming is hard enough to get sucked down by others at this time. Sounds like not much to collect so unless he files bankruptcy himself, I guess chalk it up to experience and move on myself.

But you have options, he doesn't is sounds like.

Paul

Paul
 
This is a tough situation. Sounds like the three of you a real friends and that is probably how you got into this pickle. It's really tough to mix friendship and business but people do it every day. All that being said the three of you need to sit down and sort out what's been put up as collateral and what is fully owned by the guy going under. Sell what you can (everything has value, sometimes it's not much) figure out what the two standing guys can /are willing to leave the third then sell all the rest and walk away. Are you going to stay friends that is the real question and will play a big role in your decisions'.
Myself I have helped guys(friends) that stole from me and will never get in a business relationship with them again but will be friendly. I have others that were just trying to sucker me and I won't even speak to anymore. It all depends on how you asses the situation.
 
(quoted from post at 08:40:15 01/17/18) If he planning to ''walk away'' leaving his mess to be cleaned up by others and is not concerned with repaying a legitimate debt incurred by himself then he is a bum, plain and simple. I wouldn't waste one second worrying about what happens to him, the people he rooked are the injured parties.

The BTO was the one considering walking away as I read the story. Since there would be nothing left to pay him back after the bank had their way with the property and everything else.
 
Well you'll see how good of a friend he is when he is no longer legally obligated to repay the money he owes you fellows if he tries to repay or just says tough luck.I know where I'll
put my Hundred$ on that one.
 
Sounds like a bad deal for all. I would personally, disregard all replies below except for Ted in NE OH. Way too many details unknown to make any kind of a call from here.

On top of everything else, if he is considering Bankruptcy, depending on which Chapter, he may not be able to sell anything. And if he does, it may have to come back.

Again, if Bankruptcy comes in to play, everyone had better know the rules. Bankruptcy Court will not care if all of you are friends or not.

It sounds like a tough deal for all, but some serious thinking better be going on. Good luck.
 

Money was loaned with old machinery as collateral - they'll be lucky to get the old machinery. Most likely its already been pledged as collateral on one of the bank loans. I'm not a fan of Dave Ramsey but he's right when it comes to loaning money or cosigning notes to friends and family - don't loan more than you are willing to give as a gift - because that's what you are most likely doing. There is no resolution where the people that loaned money will come out whole - the most that can hope for is that more money isn't lost than has already been loaned.


There is a reason banks say no to some loans - and sometimes its the best thing that can happen to person.
 
Yup, I worked for a guy that would gladly loan money to people he knew that couldn't get a loan from a bank. Thing was he always secured the loan with collateral that was much more valuable than the loan, knowing darn well they wouldn't pay it back. I think you call that Loan Sharking. I remember him loaning 5k to a guy who put up a 15k backhoe as collateral. 90 days later he owned and then resold the machine.
 
I guess the basic question in the post still applies BUT the one unknown factor is all of this is HOW MUCH MONEY are we dealing with in all of this? Are we talking about thousands, tens of thousands, hundreds of thousands, etc? Until we know that, passing along sound advice is pretty much impossible and/or meaningless.
 
(quoted from post at 13:01:55 01/17/18) Yup, I worked for a guy that would gladly loan money to people he knew that couldn't get a loan from a bank. Thing was he always secured the loan with collateral that was much more valuable than the loan, knowing darn well they wouldn't pay it back. I think you call that Loan Sharking. I remember him loaning 5k to a guy who put up a 15k backhoe as collateral. 90 days later he owned and then resold the machine.

President would call that being a good business man
 
No that's called Stupidity on the borrower's part.No bank or other lender is going to loan over 50% of the value of the collateral,less if the borrower's credit is bad.
 
Rest assured these guys credit was bad. Rumor was he was trying to pay off a gambling debt to avoid getting his legs broken.
 
"fast forward the smaller guy is probably going bankrupt"

He was bankrupt a long time ago, just didn't want to admit it.

Best thing for him is to sell out and get a job. If the collateral isn't worth collecting or someone else has first claim on it just write off the debt.

Main thing is to stop the bleeding as soon as possible.
 
From some of the advice and what I paid for it from lawyers over the years I'd of been far better off coming here to get legal advice,so that makes two of us anyway.If you go to court there will be at least two layers with totally different opinions on what the law says.So really their advice is just an opinion like everyone else's.
 
(quoted from post at 21:30:14 01/17/18)
President would call that being a good business man

I would call that being a good business man. Sort of like the pawn business, loan a small amount on a more valuable article, if they don't pay back the shop owns it and sells it to get back at least their loan and interest.

As someone said, Business is business, bullsh*t is bullsh*t. I personally don't loan anyone money for any reason and I don't co-sign loans. Too many problems doing that.
 
I do not profess to understand or know all the circumstances. If the small guy lived beyond his means and had to "keep up" with others, there is less sympathy I have. If living beyond his means was part of the problem, then it would seem to me he placed more value on living high on the hog, over the friendship. We face this sort of problem within my wife's family. One sibling and his wife live way beyond their means. Tapped into her mother's finances and she cut them off. Now they want to tap into my father in law's finances/get their share of the inheritance now, and it seems they will want their share and then some AFTER. They actually told my father in law they were looking to their inheritance from his estate as their only retirement fund. Anyway, to get back on track. If the small guy didn't live beyond his means, then the friendship remains an important part of this.

I agree the money lent may end up "being a gift" since there is little to nothing to recoup these losses. Going to court is a last resort. The only ones who will be satisfied will be the attorneys, because they will be greatly compensated. Saw that with two brothers who were fighting over how to divide up a jointly owned possession. It took something like 17 years and a lot of money paid to their respective attorneys. They had the division about 95 percent done, but one brother wouldn't press the other brother hard enough to take care of his final responsibility. Cost even more once the statute of limitations had run out and essentially had to start over.

If the three of you cannot or do not know how to resolve this issue, perhaps a mediator might be a good first step. Nothing is binding under mediation, unless some legal documents are drawn up whereby all parties must fulfill their respective responsibilities. This allows a low pressure exchange between the involved parties, accompanied by some neutral "third party" who may be able to structure or channel the dialogue. Again, this allows the parties to work things out themselves with an impartial third party mediator who can facilitate.

If this is unsuccessful, then one could go to binding arbitration. This is more involved and a neutral third party judge will hear both parties issues to be resolved and make a decision, which is legally binding. I cannot recall if attorneys are or are not involved in this process, but if so, the attorneys are needed to a lesser degree versus going to court and getting into a legal battle.

As a last resort, the parties can go to court and fight it out there with their hired gun attorneys. In suspect, that you as the "third wheel" are probably going to get drawn into this quagmire and have to offer testimony, and perhaps taking a side with one or the other, not something I would enjoy. One of the other two might be your friend in the end, and the other not so much your friend.

This will certainly test the friendship. If there is nothing there with the "small guy," remember that you cannot squeeze blood from a turnip. If nothing is there of value, there is nothing to recoup these losses.
 
I could tell you about a man that went to a financial advisor. There is not enough room here to tell his story. But he would have been better off if he had of gone to a local beer joint and found a drunk truck driver and spent his money getting the driver drunk. He might have got some advice that he could have used. The professional sure was no good for him.
 
Never loan any money you expect to get back. Friend or not. Congratulations upon your potential acquisition of some used machinery.
 
(quoted from post at 18:21:38 01/18/18) I could tell you about a man that went to a financial advisor. There is not enough room here to tell his story. But he would have been better off if he had of gone to a local beer joint and found a drunk truck driver and spent his money getting the driver drunk. He might have got some advice that he could have used. The professional sure was no good for him.

I get calls from commodities market advisory services. I tell them I am sorry, I already have one. They will ask if I mind saying who is doing that for me? I say no problem. He has been very accurate. He is a pet chimpanzee that I have throw darts at a large dart board with different months, grains and different prices.
 

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