COMMENT OF THE DAY: THE ART OF SLIPPING AWAY “The luxury real estate article says that a lot of owner/CEO’s of small oil companies are selling their mansions to help save their companies. That’s an assbackwards way — there’s a reason you stash a few million in your homestead: It’s exempt from creditors and bankruptcy. Let the dying company fold, file bankruptcy, sell the house later, and boom, you’re liquid again and start with fresh paper and zero liabilities.” [commonsense, commenting on The Typical Home Buyer’s Salary; Getting Creative in the Luxury Housing Market] Illustration: Lulu
Stupid comment. Executives aren’t personally responsible for their company’s debts. They own equity and spending a few million to keep a company afloat can prevent losing tens of millions in assets to bankruptcy. Plus, they have lots of cash in the bank account but would likely sell luxury assets they don’t need before dipping into the cash reserves.
Also, they probably don’t want the property tax albatross hanging on their head for a multi million dollar mansion when a code will suit their living needs just fine
That seals it. I’m keeping the mansion.
@Commenter7, that’s not how the real world works. A small to mid size company cannot get a loan without a personal guarantee from one of the owners, unless you’re publicly listed. The banks learned that scam since late nineties and will not give non PG (personal guarantee) or non-resource loans. Even if the owner is not liable on loan docs, he WILL be sued individually anyway, corporate shield laws are not what they used to be.
Also, if the guy is desperate enough to sell his homestead to float the company, the company is already on life support and has no assets worth saving. They try to save it for ego reasons. And this way he might float a few more months and then he’ll have no company and no home.
The Captain always goes down with his ship, but the Admiral sacrifices the ship for the good of he fleet, moves his flag to the next ship, and goes on to win the war.
This is how Trump intends to Make America Great Again – structure America like any of his varied self-branded sub corporations. Whenever one goes belly up (or gets sued in a class action for the large-scale fraud that unit committed), file for bankruptcy, stiff the creditors, and it’s on to the next one.
In Texas we’ve certainly heard many tales of oilmen repeatedly and insouciantly going bust and then making more millions all over again. There must be a method to all that. Interestingly, in many other countries, going broke carries a stigma so significant that it is believed to inhibit risky activities like starting your own business (or so says The Economist).
Don’t shed too many tears for these folks. On the next oil cycle upswing, the CEO’s golf buddy will bring him on at another company as an executive VP with a package worth >$1 million/yr.
Here is the answer: the Houston home is not the homestead. The ranch is the homestead. Keep a few head of cattle for the ag exemption. Lease out a corner or two for some deer hunting. Build a huge ranch house. The Houston house is just your work crash pad. When times are tough, liquidate the Houston house and rent in town. The ranch house is your safety net. Rural homestead exemption goes up to 200 acres if you have a family “living” there. There is only so big you can build in Houston before you are just throwing your money away when it comes to resale value. But good acreage in the Hill Country will just keep appreciating over time.
Semper Fudge- I hear you but what about this country’s finances leads you to believe it’s not already bankrupt? Wouldn’t it be refreshing to have someone that comes in realizing that?
Our country is not bankrupt by any conceivable definition, and if the refreshment you’re seeking is a neo-fascist xenophobe, you’re drinking the wrong kool-aid.
Semper-calm down. Besides, it was Flavor Aid.