I suppose it’s a case of having to blame someone, but I was surprised at the reaction on stuff.co.nz when they ran a story about a North Island farmer being sold up by their bank after heavy borrowing on what had been a seven generation debt-free unit.
It seems that the bank lent the family money to put in an irrigation system that then went very wrong.
Basically the original $350,000 quote was far from the end costs, and then there were complications with the bore.
The family then took the people who designed the scheme to court to recover costs, only to find that they were the wrong people to take to court and it was the well drilling people who had messed up.
So after a lot of expense and lawyers’ fees, the costs had ballooned out to a quoted $5 million debt – an amount that the farm was unable to service so the bank moved in and sold it off.
The reaction from a large number of people who added their comments to the story was that the bank was at fault and that banks are very happy to lend you money but are not at all happy to share the risks when they occur.
The comments were far from charitable I can assure you.
The point that seems to have been lost here in this particular case, is that it wasn’t the bank’s fault that the costs ran away on the project, that the workmanship by one of the contractors was extremely bad, the overruns on the work, and that it was fixing the problems and the costs of taking people to court that did the damage.
Reading between the lines the bank did everything they could to get the family through, but it became impossible to carry on.
It wasn’t the dairy downturn that did it, it was the management and problems that were then multiplied by the downturn.
Bottom line is that if you can’t service a debt, you will face bankruptcy. It happens every day of the week and is always very sad when it does happen. Families are left with nothing and the mental damage it does to all the family members is devastating, but for every story about people going down in a heap, there are stories of people staggering to their feet and rebuilding their lives.
There is a saying that most very rich people have lost everything at least three or four times, so while it is very hard and devastating at the moment, there is always light at the end of the tunnel.