Featured Article: Renewed hope

Lucinda Coulter | April 01, 2010

As the economy stabilizes, owner-operators can emerge from debt and cope with tight credit markets by scrutinizing expenses and focusing on essentials.

 

hopeSherry Nemeth had no pot of gold to show for her CB handle, Texas Rainbow, and even less hope. The daughter of an owner-operator, Nemeth had 16 years’ experience as a company driver when she bought her first truck for $48,000 with a $999 down payment in May 2007 and leased to Trout Transport, based in Omaha, Neb. But in February 2009, she declared bankruptcy.

“I was ready to give up,” Nemeth says of costly repairs needed on her 2002 model truck. “But there are people out there who are willing to help you.”

Following advice from trucking financial advisers, she took the drastic step of selling the Dallas house she’d had for 14 years. Nemeth is now running hard and living frugally in her rig.

sherry
Owner-operator Sherry Nemeth of Dallas is cutting costs by living out of her truck.

Like Nemeth, other owner-operators struggle with debt or are delaying equipment purchases as the economy tries to stabilize from the recession. Yet financial specialists say that contractors can thrive, eventually improving credit scores, if they avoid credit card use, cut expenses to essential items, seize opportunities to increase revenue, and stick to a budget.

The recession has not been the direct cause of owner-operators leaving the business, says Richard DeForest, vice president of Denver-based ATBS, the nation’s largest owner-operator financial services company. Instead, it’s their overreliance on credit and subsequent bills they were unable to pay. But the recession has prompted advisers at ATBS to focus on helping operators reduce expenses, since “it’s harder to increase revenues right now,” DeForest notes.

Still, for some clients, more time on the road is essential to stay financially solvent, says Robert Butcher, an ATBS counselor who develops recovery plans for owner-operators. He says some of his clients have experienced unforeseen calamities – traffic accidents, divorce, children in jail or a serious illness in the family.

Yet Butcher says those who are open to assistance can often manage debt without declaring bankruptcy, a move counselors advise against because it stays on a credit report for 10 years. His guidelines for getting on better footing financially include careful scrutiny of fuel costs, truck maintenance and home expenses.

Selling extra cars or motorcycles can help. “Truckers don’t have to have two new vehicles,” Butcher says. “Most truckers I talk to have personal vehicle debt of $800 to $1,200 per month.”

Nemeth, an ATBS client, had missed her first truck payment as she tried to pay $5,000 in repairs for five breakdowns in the first month of ownership. She had no money left when her engine failed in September 2009, and she tried to return the truck to her local dealership.

Instead, the dealer offered to help, paying for a few nights’ hotel stay while the truck was repaired. The dealer did an in-frame overhaul, including new injectors and a new turbo, at a discounted cost of $11,000, and deferred two monthly payments.

Not only did Nemeth sell her house, she borrowed $2,100 from family members for the engine overhaul and now hauls freight for two-month intervals before she stops at her sister’s house in McKinney, Texas, to rest.

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