Jan 23, 2026
Heather from Nashville broke down when she called in to The Ramsey Show to tell co-hosts Dave Ramsey and Jade Warshaw about how she and her husband were “in way over [their] heads” because of a business loan.
Heather and her husband are both 28 years old, and after her husband lost his job four years ago and couldn't find steady work, they started their own business: a summer camp for kids.
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Now, they are $1.3 million in debt. They owe $48,000 on their home, which is worth about $250,000, plus they owe $17,000 on their cars, $30,000 in back taxes, and $19,000 in credit card debt.
The bulk of the debt, though, nearly $1.2 million, is a loan they took out to buy another business’ assets. Heather said that their summer camp business does well, bringing in about $200,000 a year. But the loan for the assets they bought from an event rental business — lighting, audio visual equipment and inflatables — is sinking them.
A bad deal that snowballed into seven-figure debt
Ramsey was incensed that Heather and her partner were able to get the loan from the Small Business Administration (SBA) in the first place. “Anybody that made this loan should be just lined up and shot. Oh my god, this is ridiculous,” Ramsey said.
He asked Heather whether they would be able to sell the assets for anywhere close to what they paid for them. She said they couldn’t because they realized later that they had been deceived and it was a bad deal — they had overpaid by about $400,000.
Before giving Heather his advice, he told her about his own experience when he was her age, when he “lost everything and ended up bankrupt.”
He said for Heather and her husband, “The worst case scenario is you lose the business, you lose the camp, and you start your lives fresh after a bankruptcy. And you hold on to each other.” He went on to say that “lots of people have gone broke,” but that it was important to keep their relationship strong.
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Although Ramsey seemed like he might suggest that they have to file for bankruptcy, saying, “I don’t right now see how you’re getting out of this,” he gave Heather other options than bankruptcy to solve her problem.
“I would sell [the assets] for whatever you can get for it. If you can get $800,000 for it, take it. And go to the SBA and do a short sale. Hire an attorney and tell the SBA, ‘You get nothing, honey, if you don’t take this 800, cause I’m walking and you’re going to own a blow-up inflatable.’”
The other option Ramsey gave Heather, if they were unable to do a short sell, was to “sign a note for the difference and scratch your way through that $400K,” since they are making about $200,000 from the summer camp, which is still in operation. He said that, with their income, they could “bust through these other little debts, and pay the stinking IRS.”
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When small business owners have to consider bankruptcy
Starting a small business comes with financial risk, especially when taking on a large loan, like the caller Heather and her husband did.
Small business owners may also use their own money to float their businesses, which comes with risks as well. The Fed Small Business 2024 Report on Startup Firms says that 77% of startups without employees that were in their first two years of business accessed personal funds to address challenges (2).
Taking on such a large loan like Heather and her husband did is a risky move. “The more debt you’re in, the more risk you take,” Ramsey said. He noted that the couple’s income was “nowhere near enough to even service the debt, much less everything else.”
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Taking on big risks with your small business can lead you down a road that ends in bankruptcy. Bankruptcy can have serious consequences, both financial and legal. How you file for bankruptcy as a small business owner depends on whether your business is sole proprietor, or if it is a partnership, corporation or limited liability company (LLC) (3).
According to the City Bar Justice Center, it is important for small business owners thinking of filing for bankruptcy to consider “the legal structure of their businesses; whether they want to close their businesses or keep operating; and whether the business owners are personally liable for their business debts through personal guarantees.”
There are instances where a small business owner could be held liable for debt in bankruptcy, according to the City Bar Justice Center. For example, in the case of a corporation or LLC, “if creditors find that the business finances were misused, or the corporation or LLC was simply an alter ego for the individual business owners, creditors may sue to have the debt shift from the business onto the individual owners, making them personally liable for the debt” (3).
For business owners like Heather, the right path forward may not be obvious. That’s why small business owners facing overwhelming debt should speak with a bankruptcy attorney before making any decisions, to understand whether selling assets, restructuring debt or starting over offers the clearest way out.
Article sources
We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.
The Ramsey Show Highlights (1); Fed Small Business (2); City Bar Justice Center (3)
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Rebecca Payne has more than a decade of experience editing and producing both local and national daily newspapers. She's worked on the Toronto Star, the Globe and Mail, Metro, Canada's National Observer, the Virginian-Pilot and Daily Press.
