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Many small businesses have signed personal guarantees on their commercial leases, meaning that landlords will come after them even after they've closed. Restau
by tarr11 6y ago
Many small businesses have signed personal guarantees on their commercial leases, meaning that landlords will come after them even after they've closed.
Restaurants for example will often have 5-10 year lease terms.
- icelancer 6y ago>> Many small businesses have signed personal guarantees on their commercial leases, meaning that landlords will come after them even after they've closed. Yep. Just signed a 7 year lease and personally guaranteed it. More things few people are talking about when advocating for lockdowns.
- toomuchtodo 6y agoPersonal bankruptcy is only on your credit report for 7 years, versus being on the hook for sums you could never afford to repay. You'll be eligible for credit right away after the discharge (because you can't go BK again for 8 years), and eligible for a low down payment FHA mortgage (3-5% down) after two years (from discharge date).
- ouid 6y agofurthermore, it seems that it should be easier to obtain credit if you have no debt than if you have more debt than collateral, and obviously no ability to pay it.
- betterunix2 6y agoNot if the reason you have no debt is that you had the courts erase it all.
- Grae 6y agoI don't understand why this is being downvoted. Bankruptcy is a tool to encourage efficient risk-taking and solving otherwise tricky collective action problems for creditors. There's an unfortunate stigma about bankruptcy in the U.S. which leads to _far_ fewer people/businesses filing bankruptcy than should be. No one is better off limping along under unsustainable debt, not businesses and not individuals. We need to get rid of this stigma and let people use the tools we put in place to solve these problems.
- nmfisher 6y agoSure, but the business owner probably also lost his/her house in the process. Just because it's not permanent, doesn't mean bankruptcy is an easy option.
- toomuchtodo 6y agoDuring bankruptcy, all of your property will be placed in a bankruptcy estate. If you want to keep your home, you can usually exempt it from the estate and will continue to be liable for the mortgage as long as you make payments. If you don’t have enough equity in the property to secure junior liens on the property, such as a home equity loan, those will be stripped away and you’ll only be liable moving forward for the senior lien (primary mortgage). There’s a lot of nuance, and it’s hard to generalize, but the system is designed to provide some relief in a reasonable manner.
- nmfisher 6y agoI don't know what it's like in the USA, but Australian banks simply don't lend to small businesses without taking security over (usually) real estate. This inevitably means a senior mortgage over the principal's primary residence. That being said, Australian banks are notoriously tight-fisted for any non-property investment, so perhaps things are more amenable in the USA.
- toomuchtodo 6y agoUS credit flows like water, despite our generous bankruptcy laws.
- dillonmckay 6y agoForce majure?
- adammunich 6y agoIn Russia the government set up a process to have people freed from contracts during the pandemic, using this legal concept.
- schemy 6y agoThis is where having a hippy friend who doesn't believe in money is really useful. The trick is to get them sober, washed and suited up for the meeting where you sign. And be very, very nice to them the next few years when they ask you for a favor.