The tide went out and I got caught naked

[Pjtheentrepreneur]

Hey everyone! I need some hope/help/advice and support. I’m 24 and just graduated college in December.

I built a big business running cold email campaigns for digital marketing agency’s over the last three years and it all came tumbling down in August. The machine learning that google implemented this past winter made cold emailing almost impossible.

At the height this past spring we were signing 12 to 15 clients a month and grossing up to $30,000 a month. I had 8 employees at one time. My payroll got out of control (some months it was $8,000 to $10,000)

But, I lost everything when we could no longer send emails. I took out a $20,000 Kabbage loan in July to cover payroll and cover refunds. When that was gone I told the rest of the clients to file claims with PayPal to get refunded, which they did.

My whole team quit in August when I couldn’t make payroll.

I live with my parents

But, the failed business left me with $75,000 in debt (I had a money back guarantee based on results and had to refund 20 Clients $2,600 each.

I haven’t had a source of income since July. I’m just so bogged down. I literally owe everyone money - $5,500 to my college, the $5,000 to the IRS, $1,700 to the state, $19,000 Kabbage (the company I got a loan for the business from to cover refunds and payroll in the final months), and a $44,000 negative PayPal balance

I live hand to mouth on sporadic bits of income here and there from selling email lists and offering consulting to agency owners. I’m talking $800 to $900 a month.

With the market crash and businesses closing the digital agency space is and will continue to be hit hard. Slaughtered might be a better word. This means the market I’ve served and made a living from the last 3 years may have totally dried up.

My payments are $1,300 a month total to Kabbage, the IRS, and the state. I owe PayPal $44,000 as a negative balance (it’s been negative since July) but they haven’t sent it to collections yet, but when they do that will be another monthly payment plan. I’ve been calling PayPal more than they’ve been calling me (not at all).

I’ve been hoping PayPal will send it to collections so I can settle but they’ve kept it in house. They haven’t called me in months.

I go from good, “normal” days where I feel like this debt will be easy to pay off once I get something new started and don’t feel worried to days like today.

Right now I have $1,400 in the bank and my credit score is 660

My parents don’t know about the debt. There’s nothing they could do financially if they wanted to. Telling them would make things ten times worse.

[utaca]

This may sound cold but bankruptcy is always an option.

[mozar]

Are you still paying? If you are still paying once you stop then it will go to collections. It will probably be less stressful to spend what money you do have to pay for a lawyer to file bankruptcy for you.
Otherwise you could be waiting for years to settle with each company. The irs one might not be dischargable but once everything else is done the monthly payment should be manageble.

[Dr. Pepper]

Confused as to what this business was, sounds like you were sending spam emails? Regardless you really have only two options, file for bankruptcy or get a job and pay it off.

[nemesis]

Confused as to what this business was, sounds like you were sending spam emails? Regardless you really have only two options, file for bankruptcy or get a job and pay it off.

that’s what it sounds like to me.  Blocked by Google’s machine learning algorithm which blocks spam.

I hate email spam.

[Kronsey]

Hey everyone! I need some hope/help/advice and support. I’m 24 and just graduated college in December.

I built a big business running cold email campaigns for digital marketing agency’s over the last three years and it all came tumbling down in August. The machine learning that google implemented this past winter made cold emailing almost impossible.

At the height this past spring we were signing 12 to 15 clients a month and grossing up to $30,000 a month. I had 8 employees at one time. My payroll got out of control (some months it was $8,000 to $10,000)

But, I lost everything when we could no longer send emails. I took out a $20,000 Kabbage loan in July to cover payroll and cover refunds. When that was gone I told the rest of the clients to file claims with PayPal to get refunded, which they did.

My whole team quit in August when I couldn’t make payroll.

I live with my parents

But, the failed business left me with $75,000 in debt (I had a money back guarantee based on results and had to refund 20 Clients $2,600 each.

I haven’t had a source of income since July. I’m just so bogged down. I literally owe everyone money - $5,500 to my college, the $5,000 to the IRS, $1,700 to the state, $19,000 Kabbage (the company I got a loan for the business from to cover refunds and payroll in the final months), and a $44,000 negative PayPal balance

I live hand to mouth on sporadic bits of income here and there from selling email lists and offering consulting to agency owners. I’m talking $800 to $900 a month.

With the market crash and businesses closing the digital agency space is and will continue to be hit hard. Slaughtered might be a better word. This means the market I’ve served and made a living from the last 3 years may have totally dried up.

My payments are $1,300 a month total to Kabbage, the IRS, and the state. I owe PayPal $44,000 as a negative balance (it’s been negative since July) but they haven’t sent it to collections yet, but when they do that will be another monthly payment plan. I’ve been calling PayPal more than they’ve been calling me (not at all).

I’ve been hoping PayPal will send it to collections so I can settle but they’ve kept it in house. They haven’t called me in months.

I go from good, “normal” days where I feel like this debt will be easy to pay off once I get something new started and don’t feel worried to days like today.

Right now I have $1,400 in the bank and my credit score is 660

My parents don’t know about the debt. There’s nothing they could do financially if they wanted to. Telling them would make things ten times worse.

8 Step Recovery Plan:

1. Stop beating yourself up. You made some dumb financial moves and over extended yourself, but you've learned some valuable business lessons at the same time. You can't get down on yourself. You have to start taking action to dig yourself out of this hole.

2. Get a job with the degree you just obtained. You're in no mental state to start another biz right now. If you were, you would have done so already (we're a long ways past August). No complaining, no feeling sorry for yourself. Just get the best damn job you can right now. Gonna be honest... the economy is headed for the toilet (may already be there). Beggars can't be choosers. Put an honest effort into being a good employee, learning, and making an impact in whatever role you find. Good employees are tough to find in most professions. It shouldn't be that hard to stand out with some effort once you find the job.

3. Stop paying and communicating on all debt EXCEPT for IRS and state tax debt. I'm guessing this is from income taxes, yes? These are not discharged in bankruptcy and the IRS can get nasty if you stop paying and go no contact. Don't do that. Keep making minimum payments on the tax debts and forget the rest for right now. Once you have a job, live as frugally as possible and pay off the IRS and state. What is the money owed to the college for? Is it student loans or some other bill? If student loans, those aren't dischargable either so make minimum payments to not go into default. The monthly payment can't be that bad if total debt is only $5,500. Quit communicating with Kabbage and PayPal for now. If they turn you over to collections, no big deal at this point.

4. Contact a bankruptcy attorney. It may be worth going that avenue with the large debt to Kabbage and PayPal. After a consulation, you'll need to figure out if you want to file for bankruptcy or dig yourself out of this debt hole.

5. It is fine to not tell your parents about the debt and biz failure, but don't be a bum at the same time. With the job you obtain, offer to pay some rent and help pay for food. They are doing you a big favor by letting you live at home. Don't be a financial drain on them especially as the economy takes a turn for the worst. Have some self respect and contribute financially even if it is a small amount each month. You don't have to go into details, but you could probably tell them you appreciate what they are doing for you as it is helping you clean up your financial life and pay off a few bills.

6. Now that you have a job and some income, begin thinking about your next career/biz move. What type of work do you want to do that pays well, has good long term prospects, and that you have some skills and inclination to do. You don't have to figure it out all at once, but over time you need to be smart about your career choices. That could be biz ownership again, but don't force that on yourself. If you're interested in financial independence (you're on the MMM forum after all), then finding the right fit for a career is one of your most important steps.

7. If you do move forward with bankruptcy, you will have a period of time where your credit sucks. Start to rebuild your credit slowly. You do not need to go into debt to do this. Start small with a credit card and buy a few supplies on there each month and pay it off before any interest accrues. You need to forget about some of the "American Dream" things like buying a house, etc for right now.

8. Live as frugally as you possibly can. Truly learn the difference between wants and needs. If it isn't essential, don't buy it until you've dug out of this hole. No exceptions.

Things aren't as bad as you probably think they are. You're still young and have your entire life in front of you. If you buckle down and commit to fixing what went wrong, you'll look back and smile at all the lessons you learned from this experience.

[Sibley]

Agreed with Kronsey.

also, when you're thinking about what you want to do long term, maybe stay away from things like sending spam emails? To be brutally honest, I'm glad you got put out of business. Figure out something that isn't evil.

[vand]

my credit score is 660

which is at least 660 points too high. I wouldn't lend you a penny.

[Goldielocks]

So, you tried for a solid business and got side swiped.   An expensive education that is not over yet, as you are about to learn when bankruptcy makes sense, and does it make sense for you.

Time to call a lawyer and have a talk.   I hope you can pony up some $$'s for the advice, because you need it.

Bankruptcy was created to allow businesses and individuals to rebuild, and to rebuild faster than without this protection.

Also - be honest with your parents.  You were honest with your employees and clients, so now tell your parents the facts, that the business failed, you are stressed and in debt but figuring it out, and don't need anything different from them other than the on-going family relationships that they have been giving you.

[Nate79]

I'm confused how you ran this successful business for 3 years and when it got shut down you have almost no money and a big pile of debt? Either you were living above your means spending every penny you made or it was not actually making any money.

Sent from my SM-G950U using Tapatalk

[Lady Stash]

Check out Dave Ramsey's podcast.  He takes calls from people in debt and walks them through their options and how to move forward. 

It's not sophisticated financial advice but it sounds like you could use some emotional help laying out a plan to deal with this.

I agree with the previous poster - deal with the IRS first. 

Good luck.

[Goldielocks]

I'm confused how you ran this successful business for 3 years and when it got shut down you have almost no money and a big pile of debt? Either you were living above your means spending every penny you made or it was not actually making any money.

Sent from my SM-G950U using Tapatalk

Actually this is common for starting a business.  Each year or each month you take all your profits and roll it into expansion (marketing, hiring someone, ordering more product than before). Maybe, just maybe, you also took a minor draw on the business to pay you back for some time and give you something to live on.

A new business would be lucky to break even after 3 years.

[Villanelle]

You were grossing $30k month.  What were you actually making?

I ask because it sounds like either your business was never actually making money, or it was and you have a spending problem.  Determining which will be important going forward, regardless of what you do to move forward.

[ysette9]

You are 24 with a college degree and low living expenses. You have everything in front of you! Yes, you have debt, but that is pretty common for students nowadays. Just go out and look for a decent job using the skill set you got your degree in and start chipping away at the debt. Many many people start out in similar positions and work their way out to a stable financial place.

You did a very American thing: you gave it a go at starting your own business and it didn’t work out. No shame there. Most new businesses fail anyway and I’m sure you learned something in the process that you can talk about in interviews and make you a better employee or employer in the futur.

Chin up. You can do this.

[big_owl]

Spam email?  Couldn't have happened to a better person as far as I'm concerned. Best of luck, enjoy living with your parents.  #NotWinning

MOD EDIT: Rude comments are not allowed, regardless of what you think of someone.

[Paper Chaser]

$1300/month in debt repayment would basically be $8/hr for a full time employee. Time to go get a normal job. NOW. If a job in your degree field isn't easy to come by, Amazon, Lowe's, and McDonalds are pretty much always hiring without a specific skillset required, and they can pay twice what you'd need to cover your debts. They may even have enough schedule flexibility for you to fit in some interviews during regular business hours for a more long term job. The important thing is to get some income coming in while you plan your next move instead of wallowing in self pity.

[OtherJen]

$1300/month in debt repayment would basically be $8/hr for a full time employee. Time to go get a normal job. NOW. If a job in your degree field isn't easy to come by, Amazon, Lowe's, and McDonalds are pretty much always hiring without a specific skillset required, and they can pay twice what you'd need to cover your debts. They may even have enough schedule flexibility for you to fit in some interviews during regular business hours for a more long term job. The important thing is to get some income coming in while you plan your next move instead of wallowing in self pity.

Literally all the grocery stores in my area are hiring for immediate employment. I can't imagine this isn't true in most metro areas of the US right now.

[Loren Ver]

@Kronsey you totally make this sound like something people can do if they sit down and make an actionable plan.  How dare you!  ;).

Truthfully the OP is starting out with less debt than most college students and most college dept is non-dis-chargeable.  And he/she got the education on running a business.  Not great, but not too bad for being in ones 20s.

LV

[JLE1990]

I want to add a few things in here that I didn't see already said:

One thing I have seen and want to reiterate, CALM DOWN. This is not the end, business, especially internet based businesses, have been constantly evolving since the beginning.

2. Get a job!! You are young and physically healthy yes? There are a lot of jobs out there that will be happy to take someone who has operated their own business for three years. Most employers love to hire prior business owners because they understand how a company works and don't just think the money materializes out of thin air into the direct deposit.
You can also get a manual labor job. I have used those for years before converting to an office job and they typically pay reasonably well and are very easy to come and go from.
3. Again, CALM DOWN. like @Loren Ver said, you actually have very little debt in comparison to many college kids, or even parents. The fact that you live with your parents means you probably have basically $0 living expenses and can save all of your income. I definitely do not think you should file for bankruptcy because that will destroy your credit for at least 7 years. Get a job that pays $30K and you could be above water in less than 2 years.

[better late]

Did you happen to buy a car while you were flush? Anything else like that you can sell?