No drama that can’t be sorted, not even a bankruptcy blow to an expansion loan
A WIFE’S insolvency issue has stalled an expansion loan for a business but she should dial down the drama as it can be sorted, writes Barefoot Investor.
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A WIFE’S insolvency issue has stalled an expansion loan for a business but she should dial down the drama as it can be sorted.
INGRID ASKS: My husband’s business has taken a massive hit, and I am entirely to blame. He has been a part-owner of a successful business for the past eight years. They have finally reached the stage where they are able to expand, and just a few weeks ago were approved for a significant loan. Today, they received a call informing them the loan had been withdrawn: because years ago when they were setting up the company I was made a director, and I am bankrupt. (My husband and I have totally separate finances. I have nothing to do with the company, and own no shares. I am just a stay-at-home mum to three young kids.) When the business’s bank sent the paperwork to the seller’s bank, they were flagged about my insolvency. The loan was immediately withdrawn. Because of me. Now I have single-handedly destroyed the future (and present) of my husband’s business partners, and the business they have all worked so hard to build. I am at a complete loss as to what I can do, short of divorce.
BAREFOOT REPLIES: Dial down the drama! You haven’t ruined the business. And you don’t need a divorce, though a competent accountant would be nice. You can’t be a director of a company if you’re bankrupt (so you should have left before you went bankrupt). But you can fix this — just call your accountant and have them lodge with ASIC and get it cleaned up. Then have your husband explain the situation to the bank — that you’re basically a patsy director who owns no shares. If the business’s financials stack up (and the directors can offer the appropriate guarantees), they’ll get the loot. If the financials don’t stack up, they won’t. Now the thing for me that is drama-worthy is that you and your husband still split the bills like you’re flatmates. That’s going to strain your relationship, if it isn’t already (and it sounds like it is). You need to work as a team, split everything down the middle, and make joint decisions. Do it for your kids.
DON’T HEDGE BETS
JAMES ASKS: I have been thinking about what I could do to have my deposit savings keep pace over the next couple of years before I buy my place. One idea I have is to invest my deposit savings into BrickX, which allows you to buy a share in an investment property. I see it as a hedge against rising property prices. What do you think?
BAREFOOT REPLIES: I wouldn’t do it, even though it is a hedge (less their fees, and less any potential capital gains tax). Reason being, I don’t advise people to buy an investment property before they purchase their principal place of residence, because in all the years I’ve been doing this I’ve never seen it work out. (And with a BrickX property, you don’t have the option of eventually living in it.) ScoMo’s new First Home Super Saver Scheme is admittedly a bit of a fizzer (maybe that’s why it’s got the acronym FHSSS). But it’s exactly where you should be saving for the last few years of your deposit. That’s because a couple earning $65,000 each will save an additional $12,000 by using the scheme — guaranteed. And for the average Aussie trying to buy a home in one of the most overvalued patches on earth, every cent counts.
BUY AUSTRALIAN
REG WRITES: I have no question. I just cannot believe that — in the paper last week — you would be pushing a company such as Amazon.com. Talk about being a hypocrite! Here we are, us plebs who go to work every day, some of us for minimal wages, working 40 hours a week to pay for our mortgages and living expenses, doing our damnedest to make ends meet. And you are telling us how great this overseas company is just because they can deliver washing powder faster than Superman — and cut back jobs. What about advance Australia fair?
BAREFOOT REPLIES: Competition’s a bitch, ain’t it, Reg? Whether you or I like it or not, Amazon is coming to Australia and it’s going to rock the retail industry. And that’s the point I made to my readers: there are 1.3 million Aussie retail workers, and jobs will go. (They’re called the “country killer” for a reason.) So what can we do? Well, we can vote with our feet and buy everything locally from Aussie producers and retailers. But you and I know ... we won’t.
DOWNSIZE YOUR DEBT
KATHY AND KEVIN ASK: My husband and I are on the age pension and receive $2200 per month. We also receive an overseas pension of $700 a month. We have a combined super balance of $32,000 and a home worth $600,000. We owe $25,000 on our car, $24,000 on our home, and $25,000 on a bank overdraft (we used to have a business but it collapsed). We are considering borrowing $100,000 for debt consolidation, paying off the car and overdraft, putting some into our home loan, and topping up our super with the balance. The payments on such a loan would be $600 per month (based on current interest rates). Please help, as this is leaving me anxious and sleepless at night.
BAREFOOT REPLIES: You’re going to struggle to get a $100,000 loan when you’re on the pension, and with good reason: Pensioners can’t afford to be repaying debts! If I were in your shoes, I’d downsize your home, pay off all your debts, and keep the money in super as a backstop. Otherwise you could withdraw your super as a lump sum and pay off the highest-interest debt. Then both of you could go back to work a day or so a week (combined you can earn $13,000 each before it affects your Centrelink pension), and possibly rent out a room until you’re debt free. Good luck.
Read more Barefoot:
How garden guru Peter Cundall achieves real wealth
Learn to live with a HECS debt and direct cash elsewhere
Who should open a first home super saver?
The Barefoot Investor holds an Australian Financial Services Licence (302081). This is general advice only. It should not replace individual, independent, personal financial advice
Originally published as No drama that can’t be sorted, not even a bankruptcy blow to an expansion loan
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