My Business Is $580,000 in Debt (File for Bankruptcy?)

Brought to you by the EveryDollar app. Start budgeting for free today. Late 2024, you know, I retired from the military. I served for 22 years and earlier that year I decided to open up like a kind of like a shop and where we just do like detail services, paint protection, film wraps, and things like that. And yeah, it actually cost me a lot of money throughout that year. I'm sure. How much? To the point, well, we're at a point now where we're like like $580,000 in debt at this point. Okay. That first year we took like a $220,000 loss. Admittedly, I think I hired too many people full time. Kind of went in too fast and too hard on that. Yeah. And yeah, it kind of really hurt me. So I had to take like an SBA loan to kind of get caught up and used a bunch of credit cards. And then the year after we netted, so just last year, we netted about 35% net loss. So we had another net loss, but it was a better net loss. You're still throwing money at this thing. I'm still throwing money at this thing. I mean, it seems like we're kind of like making a way out of that. I mean, what's the stop loss here? A million dollars in debt and then we'll call it quits? I mean, at some point you just got to go, this ain't it. I would rather pack it up now versus try to... It's like a gambler where they lost a bunch of money in Vegas and they go back to go like, well, now I got to win even bigger to get out of this mess. Right. That's what I was afraid of. And through this process, I've kind of been free labor. So I haven't been getting paid by my business. On top of that, how are you paying your bills? Through more debt? Do you have retirement through military? I do. I do. Okay. What's that per month? My wife works too. I pull in about 5,500 take home per month from my military retirement. And then what does she make? She makes about take home 4,500-ish per month. Okay. So 10 grand a month is what we're taking home. And that's the hard truth is that's the number we need to actually pay down this over half a million dollars in debt. Right. What does the trajectory look like for revenue? It's looking positive. Because last year, like I said, even though we had a net loss, it was a smaller net loss. And I think this year we'll be in the positive. But I'm struggling because I've been working for free for two years essentially in this business. Well, and digging deeper in debt. I mean, 35% loss. I mean, this is just a very expensive hobby at this point. This isn't a business. Even if it breaks even, this isn't worth it. No. Right. Jimmy, when you project out with all these loans, is it half a million now or how much debt in general? I'm just trying to project out what by, I don't know, in the next month or two, how much total debt are you guys in? So I've written everything down. So as it stands right now, on the business side, we're at $580,000 in debt. I know I have a PhD in being a bozo. How much of that's credit card? How much of that is small business loans? So $165,000 of that is credit. And then the rest is split up between SBA, working capital, and a line of credit. Because I'm just thinking the credit cards, if you get behind, those will be easier to settle than some of these loans directly from the bank. What does your wife think about this? What does she think you should do? She's not very happy with it, but she's been very supportive and very understanding throughout the process. So an absolute blessing to me. Definitely not an added stressor. She's been an anchor for me, for sure. Yeah. I mean, a little bit, Jimmy, but a part of me also is like, you guys aren't living in reality. She should be kind of flipping out. Do you know what I mean? I mean, I understand the anchor of feeling supportive, but you're feeling supported and doing something that's continually getting you guys deeper and deeper into a problem versus saying, stop. Stop where we are, and we're done. Because we can't just keep doing this. And the problem too is that the guesswork for what you're possibly going to do this year, I mean, you know what I mean? It's like you can't predict it. And so you guys either have to say, we're going to try to stick this out for a year with no more debt, no more debt. And if that means we have to close up parts of the business in order to do that, okay, to see if we can get some revenue in here. But you guys can't just keep digging yourselves in a hole and expect just to come out the other side. So I would sit down and you guys, I mean, you either need to make a decision. If you were to stop this completely, do you guys have things that you can sell off in the business? Like, is there any way that you could gain any of this money back if you were to close shop today? From like a real estate perspective or like, you know what I mean? Equipment you have in the business. Yeah, I have about $50,000 worth of equipment, but I think that's tied up in the SBA loan. They would have to, you know, I'd have to get permission to sell that off, to pay that loan down. And that's why I was like, worst case, you know, I'd really want to avoid bankruptcy. It's definitely not my first choice. And I even thought about getting like a job, so I can just get some sort of income and then using that job to pay down this debt. But since it's a business, I don't really want to like create murky waters with me paying off business debt with my own personal income. It's all tied to you anyways, Jimmy. Go back to the papers. Look who signed it. It's you. Yeah, yeah. I mean, they're all going to come for you. It's not like car detailer LLC, well, they owe the money, not Jimmy. It's guaranteed by you. And so that's the hard news, is you have to now picture this like, it's just consumer debt that you took on. And so you're going to begin the business of cleaning it up. And I hope that you can find a new job that can create a better income that will allow you to clean this up faster. But if you just even sell a 50 grand worth of equipment, that's 10% of your debt you just knocked out. And so you got to start making progress. I would not sink more money into this thing just to be 600,000 in debt, 650 and hope we have less of a net loss. Oh, I'm heartbroken for you, man. Thank you for your service to 22 years. That's incredible. I hope you guys can climb out of this. Create your free every dollar budget today. The simplest way to budget for your life.