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September 2004 - Stubbornly Operating A Losing Business, Couple Went Broke

Stubbornly Operating A Losing Business, Couple Went Broke

☳ by Adam Aspilla

It is common for people not to let go unwanted items even the items are of no value (garbage) for reasons that they are emotionally attached to them. This is commonly called “sentimental value.” This may be good if the items are souvenir. However, it is tantamount to insanity if someone is stubbornly keeping something that could cause her/him financial trouble.


A good illustration was a couple who owned a convenience store. They operated the said store for years. When supermarkets and Chinese stores were opened nearby, their business slowed down for they could not compete (their prices were higher) with their neighboring competitors. As a result, the profitability of their business gradually diminished until it became a losing operation.


For months they put in additional capital to pay for rent of the store space and for payment of utilities. The husband was working full time as manager of the store, while the wife was earning a decent income as a supervisor of a manufacturing company. The husband had maximized his cards credit limit to infuse more capital to continue the operation of their convenience store despite operating at a loss.


When the husband had defaulted the payment of his cards, they asked for advice. The advice was for the couple to sell the store or if there was no buyer, simply to close down the store rather than losing more money every month to pay for the rent and utilities. The couple’s answer was “ we could not sell the store or simply close it down for this store has sentimental value to us, we already exerted so much effort and invested so much money on the store.”


So, the couple continued the operation of their store because of the “sentimental value.” However, the couple came back after a year to seek for another advice. This time their store was already padlocked by the landlord for non-payment of rent and the credit cards of the wife had also exceeded their credit limit and the wife also defaulted her payments.


As a consequence of stubbornly operating the store for more than one year at a losing operation, the couple’s debts exceeded their assets. In addition, the husband had no income. Pressured by lenders, the only way for the couple to silence the harassing calls from creditors and to forestall the legal proceeding against them for non-payment of debts, bankruptcy was their only option. The couple lost their store and house as a result of bankruptcy.


Should the couple only heed the advice earlier to discontinue the operation of the store they could have kept their house and could have avoided bankruptcy. It is good to know that there is a time it is good to keep something because it has a sentimental value, and there is also a time that sentimental value alone not interweaves with reason would end in a ruinous outcome as in the above scenario. Do not confuse persistence from stubbornness, for persistence is essential for success, while stubbornness is a recipe for failure.

Adam Aspilla is a Senior Financial Counselor of the Debt Clinic of Canada Inc. and the author of the book, You Can Negotiate All Your Debts. He also writes a biweekly column, “What Matters In Life” in “Taliba Newspaper. For free initial, professional and confidential consultation, please call 905-306-7572.