How to help an employee who is in debt and requesting a loan

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Wildebeest
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Re: How to help an employee who is in debt and requesting a loan

Post by Wildebeest » Sat Aug 24, 2019 11:40 am

fuddbogle wrote:
Fri Aug 23, 2019 10:07 pm
Is your company big enough to have a fleet of cars? I work for a private company (over 50M) and I could see them loaning a company car to the employee for specified period of time.

I’ve personally given 3k to a friend(10 years ago), who of course, who would pay me back over time. I’ve yet to see the first payment. :P I kinda of expected the end result.
We are a small company and there are no company cars.

Do you still see the friend you "loaned" the 3 K to ?
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Re: How to help an employee who is in debt and requesting a loan

Post by Gnirk » Sat Aug 24, 2019 12:15 pm

We had a similar situation with a valued and very hard-working employee who had two children and a healthy husband who also had trade skills but seldom worked. When he did work, he always seemed to get an injury on the job so he could collect workman’s comp as long as possible. When her car died, she asked for a loan to buy a reliable used car. We agreed to a no-interest loan, but the repayment was automatically deducted from her paycheck each month.

This was 15 years ago. The loan was paid in full over five years, and the employee has a good working relationship with the subsequent owner. Her husband hasn’t changed, he’s still lazy and working the system.

On the other hand, in 2000 we and several other business owners each loaned a friend $10,000 to keep his business afloat when he had cash flow problems. He was very grateful and promised to pay everyone back with interest. The loans didn’t save his business, he declared bankruptcy, not one cent was repaid, and we never received another Christmas card from him.
Last edited by Gnirk on Sat Aug 24, 2019 12:21 pm, edited 1 time in total.

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Re: How to help an employee who is in debt and requesting a loan

Post by 8foot7 » Sat Aug 24, 2019 12:19 pm

I’ll break with the popular opinion. Sometimes people just need a push off from rock bottom, a little bit in order to stop from getting further and further behind. This could be the start of a giant financial catastrophe for this family, and a little bit of assistance may ward that off.

I might offer to advance an amount equal to her net paycheck and split up the repayment over 24 months with a signed promissory note, authorizing deducting an equal amount from each paycheck to pay back within two years, and an understanding that if she quits you will withhold whatever she still owes out of her last check.

And then I’d tell her company policy is to only do that once for any employee ever, and it was only for emergencies so is this an emergency and does she want to burn that option?

This way you let her decide whether you help, you have some collateral, and you have a policy that is fair to other employees even if you don’t decide to publicize its ezistence.

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Re: How to help an employee who is in debt and requesting a loan

Post by Wildebeest » Sat Aug 24, 2019 1:19 pm

Nate79 wrote:
Fri Aug 23, 2019 9:51 pm
I think offering anything with string attached that they attend the Dave Ramsey financial peace university to be a great idea and is in fact often his recommendation. This type of situation seems to be every other caller on the DR show and he can certainly help get their finances turned around. I would not give a penny unless they attend the class.

Sounds like the husband needs to work about double the hours.
I agree
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Re: How to help an employee who is in debt and requesting a loan

Post by Wildebeest » Sat Aug 24, 2019 1:21 pm

Big Dog wrote:
Fri Aug 23, 2019 9:53 pm
Question: What would you do?
Sorry, but I would not continue to loan/gift them money. Besides the 401k hardship withdrawal and OT, you could offer to advance the next paycheck. But that just means zero dollars in the paycheck 2 weeks hence.

btw: I would exclude the first sentence of your draft and the "i want to help part' and the Dave Ramsey sent. (An employee would just respond, 'instead of paying $1k to Dave, can you just give it to me?')
Very helpful. Thanks
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Re: How to help an employee who is in debt and requesting a loan

Post by Wildebeest » Sat Aug 24, 2019 1:25 pm

tooluser wrote:
Fri Aug 23, 2019 9:55 pm
I would direct the employee to as many charitable and government resources as I could think of. Sometimes larger employers have Employee Assistance Programs that can help with no attribution. The problem with helping is that help soon becomes an entitlement if the employee's head is not in the right place.

As a private business owner, or even a corporate manager, I would need to balance the well-being of the business against the well being of the employee. You can't let one employee drive the business, not even the CEO. If the employee is so valuable they cannot be let go or tolerated to leave, that's a failure of management.

I've seen multiple such failures in a corporate setting. We all should do our best for each other, but sometimes tough love is what's called for. Good fences make good neighbors.
She is a good employee in the top 50 % and likeable, but no means invaluable. What you state makes perfect sense.
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Re: How to help an employee who is in debt and requesting a loan

Post by Wildebeest » Sat Aug 24, 2019 1:40 pm

arcticpineapplecorp. wrote:
Fri Aug 23, 2019 10:03 pm
just heard a podcast about an employer named Dasher who hires "economically fragile" people. The podcast link is below. One of the ideas they talked about was a matching plan where they'd contribute a certain amount so the person had an emergency fund set up with the help of the employer (because 40% of Americans don't have $400 in savings for an emergency). They also gave an example where the company was dealing with some lateness/difficulties with reliable transportation, etc. and found it made more sense to fill up an employee's flat tire rather than let the employee go (which is costly to retrain, rehire, etc.). So they try to approach situations with an eye on how to retain economically fragile folks despite the numerous challenges they bring to the workforce. She said Dasher has a 90% (or maybe it was 95%?) retention rate.

The CEO Sharon Ryan was promoting her book. Ryan co-wrote a book with Cynthia Tolsma called, The Talent Pool: How to Find and Keep Dedicated People While Making a Lasting Impact.

https://www.witf.org/smart-talk/2019/08 ... merica.php

maybe the book can provide some other ideas, or you can reach out to her with ideas for some strategies.

What a great resource. Thanks Pineapple. We will get the book.

At one point we had hired an emotionally fragile person through a recommendation from social services. She was smart and productive while working part time. We offered her full time employment and she cracked. She would text from her cubicle to a coworker in the next cubicle that she had chest pain and could not breathe and was on her way to the ER convinced she had a heart attack (while her supervisor was 6 feet away from her). She did not go to the ER and we never heard from her after that.
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Re: How to help an employee who is in debt and requesting a loan

Post by cashboy » Sat Aug 24, 2019 1:45 pm

i posted earlier but had an additional thought.


in a case like this i would (objectively) put myself in the other person's position (as me) and ask myself:

would I, in similar circumstances, ask my employer (not a friend or relative, but my employer) for a $4,000 loan?

my answer: no
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Re: How to help an employee who is in debt and requesting a loan

Post by dm200 » Sat Aug 24, 2019 1:56 pm

Maybe I missed it in this long discussion, but what is the nature/size of the employer?

Is this request for a personal loan from your wife or a company loan?

Although they often try to keep such policies/practices "quiet", some MegaCorps have such loan programs.

Might there be any other sources of assistance for her?

Considering ONLY the direct financial impact or burden, would the $4,000 be something she could deal with?

Could a smaller amount, say $2,000 - $2,500 be of significant help? If she was able to repay $100 per month for two years - might end up ok? Or maybe not?

Are there any existing employee benefits that she is not utilizing fully?

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Re: How to help an employee who is in debt and requesting a loan

Post by 123 » Sat Aug 24, 2019 2:36 pm

Two thoughts:

Asking an employer for a loan would be a "last resort" for most people I would think. I suspect they are already maxed out on credit card debt and every other kind of commercial debt they could get. It's quite possible that a significant part of the current loan request might end up going to paying off earlier loans and not to advance the family's situation.

Some kind of referral to a church or local private/public social services organization is likely a better choice as earlier posters have suggested. There may be problems in the family that money won't solve, possibly some type of substance dependency that soaks up motivation and financial resources.
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Re: How to help an employee who is in debt and requesting a loan

Post by LawyersGunsAndMoney » Sat Aug 24, 2019 2:48 pm

123 wrote:
Sat Aug 24, 2019 2:36 pm
Two thoughts:

I suspect they are already maxed out on credit card debt and every other kind of commercial debt they could get.
Don't forget recurring bouts of cancer debt!

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Re: How to help an employee who is in debt and requesting a loan

Post by Starfish » Sat Aug 24, 2019 4:36 pm

Wildebeest wrote:
Sat Aug 24, 2019 10:50 am
Starfish wrote:
Fri Aug 23, 2019 9:49 pm
We went through a similar situation. I cannot give advice but prepare yourself for a continuous loan if you go this path.
I appreciate the empathy. Actually I think you are in a better position than us to give advice.
There are 2 options here:
1. It is truly an exceptional situation. From the health problems described it could be. However if other employees find out you will have more trouble coming.
2. It is an ongoing situation, because some people just live like that. Unfortunately this is the case more often than not.

In both cases you are tied to the employee (if you fire them or they leave you lose the money). Also in second case having a payment taken from the salary makes less money available and actually more need for more loans.

In the end is a very individual decision based on your judgement of character and your relationship with that person.

PS: in our case was the second situation, hidden in a cascade of apparent "exceptions". This makes it actually hard to find out if it is truly an exception or not.

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Re: How to help an employee who is in debt and requesting a loan

Post by Starfish » Sat Aug 24, 2019 4:42 pm

123 wrote:
Sat Aug 24, 2019 2:36 pm
Two thoughts:

Asking an employer for a loan would be a "last resort" for most people I would think.
Why would be? One is free, the other is >20%.

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Re: How to help an employee who is in debt and requesting a loan

Post by Starfish » Sat Aug 24, 2019 4:51 pm

Sandtrap wrote:
Fri Aug 23, 2019 10:36 pm
I have very very rarely given an employee a monetary "gift", mostly in appreciation for something. Never a loan.
Once enabled, there's a dependent relationship that will not end. It get's easier to ask, eventually with expectations. And, it gets easy to give because to change course is too unpleasant. And, the deeper the hole, the harder to climb out, for both parties.
This.
It is very hard to ensure this was a 1 time event, and other employees might use the opportunity. It gets harder to stop it.

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Re: How to help an employee who is in debt and requesting a loan

Post by stoptothink » Sat Aug 24, 2019 4:54 pm

Starfish wrote:
Sat Aug 24, 2019 4:36 pm
Wildebeest wrote:
Sat Aug 24, 2019 10:50 am
Starfish wrote:
Fri Aug 23, 2019 9:49 pm
We went through a similar situation. I cannot give advice but prepare yourself for a continuous loan if you go this path.
I appreciate the empathy. Actually I think you are in a better position than us to give advice.
There are 2 options here:
1. It is truly an exceptional situation. From the health problems described it could be. However if other employees find out you will have more trouble coming.
2. It is an ongoing situation, because some people just live like that. Unfortunately this is the case more often than not.

In both cases you are tied to the employee (if you fire them or they leave you lose the money). Also in second case having a payment taken from the salary makes less money available and actually more need for more loans.

In the end is a very individual decision based on your judgement of character and your relationship with that person.

PS: in our case was the second situation, hidden in a cascade of apparent "exceptions". This makes it actually hard to find out if it is truly an exception or not.
Sounds like this isn't the first time the employee has asked for money. As someone else stated, I'd imagine asking an employer for money (apparently more than once) has got to be a last option for most people; I wouldn't be shocked if this individual already owes several others money.

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Re: How to help an employee who is in debt and requesting a loan

Post by smitcat » Sat Aug 24, 2019 5:21 pm

Starfish wrote:
Sat Aug 24, 2019 4:36 pm
Wildebeest wrote:
Sat Aug 24, 2019 10:50 am
Starfish wrote:
Fri Aug 23, 2019 9:49 pm
We went through a similar situation. I cannot give advice but prepare yourself for a continuous loan if you go this path.
I appreciate the empathy. Actually I think you are in a better position than us to give advice.
There are 2 options here:
1. It is truly an exceptional situation. From the health problems described it could be. However if other employees find out you will have more trouble coming.
2. It is an ongoing situation, because some people just live like that. Unfortunately this is the case more often than not.

In both cases you are tied to the employee (if you fire them or they leave you lose the money). Also in second case having a payment taken from the salary makes less money available and actually more need for more loans.

In the end is a very individual decision based on your judgement of character and your relationship with that person.

PS: in our case was the second situation, hidden in a cascade of apparent "exceptions". This makes it actually hard to find out if it is truly an exception or not.
Not only do I agree with Starfish on this but you are setting yourself up for potential legal issues whenever you choose to treat employees in dramatically different ways - unless you are prepared to loan and/or gift similar amounts to all of your employees in the future I would not entertain this potential liability on a small business.

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Re: How to help an employee who is in debt and requesting a loan

Post by clip651 » Sat Aug 24, 2019 5:28 pm

A social worker may be helpful for this employee. She has a lot going on, and a social worker can offer one on one counseling and guidance. They will also be familiar with appropriate local sources of aid for someone in this employee's circumstances - everything from cancer support groups to local charities and/or government programs that may be helpful.

It may not occur to the employee to look for a social worker as a resource, but this sort of thing is exactly what social workers are good at - not giving loans, but helping someone in a tough situation problem solve, take advantage of appropriate resources, and try to make their situation better. The hospital where she gets her cancer treatment or her primary care physician may be able to give her a referral to a social worker. This might even be covered by her insurance, but if not, I believe social workers tend to work on sliding scales for fees for lower income clients.

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Re: How to help an employee who is in debt and requesting a loan

Post by delamer » Sat Aug 24, 2019 5:31 pm

Starfish wrote:
Sat Aug 24, 2019 4:36 pm
Wildebeest wrote:
Sat Aug 24, 2019 10:50 am
Starfish wrote:
Fri Aug 23, 2019 9:49 pm
We went through a similar situation. I cannot give advice but prepare yourself for a continuous loan if you go this path.
I appreciate the empathy. Actually I think you are in a better position than us to give advice.
There are 2 options here:
1. It is truly an exceptional situation. From the health problems described it could be. However if other employees find out you will have more trouble coming.
2. It is an ongoing situation, because some people just live like that. Unfortunately this is the case more often than not.

In both cases you are tied to the employee (if you fire them or they leave you lose the money). Also in second case having a payment taken from the salary makes less money available and actually more need for more loans.

In the end is a very individual decision based on your judgement of character and your relationship with that person.

PS: in our case was the second situation, hidden in a cascade of apparent "exceptions". This makes it actually hard to find out if it is truly an exception or not.
As an earlier poster in the thread pointed out, it could be a combination of #1 & #2. Some families get by OK, even with no savings and not-great financial decisions (overspending, too much debt, etc.). But they can make the monthly payments. Then a crisis occurs — like a cancer diagnosis — and they are hit with an increase in expenses at the same time as a drop in income, and everything comes crashing down.

Many families are one crisis away from insolvency.

That said, this isn’t the OP’s wife’s problem to solve. Forgiving the prior loans, along offering access to the 401(k) and limited overtime, is generous enough.

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Re: How to help an employee who is in debt and requesting a loan

Post by cherijoh » Sat Aug 24, 2019 5:33 pm

Wildebeest wrote:
Fri Aug 23, 2019 9:00 pm
Question: What would you do?

My spouse had got an email request to lend an employee $4000. She states she is desperate and has no way to pay for needed car repairs or get her young children ready for school. She promises to pay back $ 200 a month (no mention of interest, or collateral). The husband, with a good trade, does not appear to work much and their home situation sounds complicated although we do not know the details and do not want to pry.

My spouse had given the employee a $1000 as a gift when her car was repossessed 6 months ago. Since then the employee had had a recurrent bout with cancer. (She missed almost no time for the chemo).She reports her eldest daughter was on her bank card and had overspent and my spouse had lent her $ 500 over the weekend a couple of weeks back and we were paid $ 240 back.

She has 4 children one of which is autistic and the two eldest children are working. We pay a living wage and good benefits. She works hard, is a good employee for the 1 1/2 years she has been with us. We would like to help and do right, but we do not offer personal loans to other excellent employees who have been with for many years and have not had any requests either.

My first try at a response is:

Dear Jane (Doe),

I feel really bad the kids are starting school and you have no money to buy them anything. I want to help, but work/personal loans are not an option. The company will pay for you and your husband for Dave Ramsey course. You can work over time up to 10 hour per week if you would elect to do so. You are vested $2500 in the 401 K and we will check to see what you can withdraw.

Spouse of Wildebeest.


My spouse would like to know what credit counselling services the Bogleheads would suggest,
is a Dave Ramsey course helpful.
If we would offer overtime to Jane Doe we are obliged to offer over time to other employees, which is not feasible.

Any suggestions?
Could you check and see what social services are available in your area and help her get a referral? The United Way might be able to point you in the right direction. We have several agencies that help coordinate with each other and help people get themselves out of a hole. Lots of employer's in my area run back-to-school drives for school supplies and goodwill stores may have some inexpensive clothing for the kids.

Does she qualify for refundable earned income credits of which she might not be taking advantage? Also, is she one who gets a tax refund in April? Changing her W-4 might bring more money into her pocket each paycheck, although this has the potential to backfire if she doesn't understand the consequences.

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Re: How to help an employee who is in debt and requesting a loan

Post by cautious » Sat Aug 24, 2019 6:50 pm

You have received many excellent suggestions about setting limits, not giving her any more money, and the potential negative effects on rest of employees - who are probably watching the drama with great interest.

What seems odd is that this woman made a request via email instead of a personal meeting. The email effectively precludes getting details about each part of the problems: the autism support system etc., more about the husband's role , and being able to judge the validity of her claims. In fact, I wonder how much of the story is true.

I would not give her any more money. I would quietly contact social agencies, tell them you have an employee with problems and ask what services are available for each situation she is dealing with. (I would not be surprised if they guess who it is.) Armed with info about resources that are available for her and the children, including legal services, I would prepare a specific list with contact names and numbers. Then choose between responding to her via email, or in a private meeting.

She is a clearly troubled woman. I have dealt with these painful situations but I would meet with her, steeling myself to say no even if there are tears. Or expect that she may be angry and quit since you are a heartless SOB. But you will have confronted and put an end to a difficult and potentially demoralizing work environment. If she stays you won't have to avoid eye contact when you run into her.
I agree that wife should stay clear.

The bottom line is that more money is not the solution for this woman's problems.
Last edited by cautious on Sat Aug 24, 2019 7:12 pm, edited 1 time in total.

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Re: How to help an employee who is in debt and requesting a loan

Post by clip651 » Sat Aug 24, 2019 6:56 pm

cautious wrote:
Sat Aug 24, 2019 6:50 pm

I would not give her any more money. I would quietly contact social agencies, tell them you have an employee with problems and ask what services are available for each situation she is dealing with. (I would not be surprised if they guess who it is.) Armed with info about resources that are available for her, including legal services, I would prepare a specific list with contact names and numbers. Then choose between responding to her via email, or in a private meeting.
There is no need for OP or OP's wife to try to act as a social worker, and find out about local resources for cancer, autism, financial support, etc. Instead, it should be recommended that the employee contact a social worker herself, either via referral from her medical team, or on her own.

By making this suggestion to the employee, you can show caring for her situation, and direct her to the appropriate resources without becoming overinvolved as an employer. And you also don't have to figure out what her true needs are, whether she might be exaggerating, what to do next time, etc, etc ... you can let the social services folks work on that part.

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Re: How to help an employee who is in debt and requesting a loan

Post by cautious » Sat Aug 24, 2019 7:26 pm

You are right they should not act as social workers. The list is of agencies she should contact. People who are as troubled as she sounds, need specific details to move forward. Since she contacted her employer, she obviously doesn't know about what's available . Also, sometimes one contact doesn't turn out well - is not the right match. A list of others offers hope, and her phone calls or emails may generate even more info.

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Re: How to help an employee who is in debt and requesting a loan

Post by JGoneRiding » Sat Aug 24, 2019 8:47 pm

Wildebeest wrote:
Sat Aug 24, 2019 9:27 am
BillWalters wrote:
Fri Aug 23, 2019 9:43 pm
I would gift the money and make it clear no additional help is available.
That is what I am leaning to. This will come out of my wife's personal account, not the business account ( our personal accounts are shared). I am concerned that other than making my wife feel better for the short term it will only create more issues down the road.
I really think you need to listen to everyone else. This could have potential legal issues for the business. You dont want to get sued by another employee for discrimination. Please think hard this is a decent amount of money and they are NOT going to stop asking for more.

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Re: How to help an employee who is in debt and requesting a loan

Post by bayview » Sun Aug 25, 2019 11:18 am

And perhaps once all this is sorted out, your wife might want to investigate setting up an EAP (Employee Assistance Program), if it is affordable. (I have no idea how much these would run.)

It is admirable that she wants to help, but an EAP would avoid many of the ticking time bombs that have been pointed out here.
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Re: How to help an employee who is in debt and requesting a loan

Post by 7eight9 » Sun Aug 25, 2019 11:29 am

Reading this thread reminded me of a passage in Liar's Poker (Micheal Lewis).

Ranieri's boyhood ambition had been to become a chef in an Italian kitchen. That ended when a head-on automobile accident on Brooklyn's Snake Hill rekindled an asthmatic condition that didn't tolerate kitchen fumes. He was a sophomore English major at St. John's College when he took a part-time job on the night shift in the Salomon Brothers mailroom in 1968. The Salomon paycheck was seventy dollars a week. Several months into his new job he ran into money problems. He had no financial support from his parents (his father had died when he was thirteen). His wife lay ill in the hospital, and the bills simply accumulated. Ranieri needed ten thousand dollars. He was nineteen years old, and all he had to his name was his weekly paycheck.

He was finally forced to request a loan from the one Salomon Brothers partner he knew vaguely. "You gotta remember," he says now, "I was convinced, really convinced, he was going to fire me." Instead the partner told Ranieri that the hospital bill would be taken care of. Ranieri thought that meant it would be deducted from his weekly paycheck, which he couldn't afford, and he began to protest. "It will be taken care of," the partner repealed. Salomon Brothers paid the ten-thousand-dollar bill racked up by the wife of its mailroom clerk with three months' tenure. There was no committee meeting to discuss whether this was appropriate. The partner to whom Ranieri had addressed his request hadn't even paused before giving his answer. It was understood that the bill would be paid, for no reason other than it was the right thing to do.
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Re: How to help an employee who is in debt and requesting a loan

Post by kevinf » Sun Aug 25, 2019 5:06 pm

7eight9 wrote:
Sun Aug 25, 2019 11:29 am
Reading this thread reminded me of a passage in Liar's Poker (Micheal Lewis)....
It's important to note that the money was not given directly to the employee, but rather paid directly to the creditor in question.

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Re: How to help an employee who is in debt and requesting a loan

Post by Vanguard Fan 1367 » Mon Aug 26, 2019 7:39 am

kevinf wrote:
Sun Aug 25, 2019 5:06 pm
7eight9 wrote:
Sun Aug 25, 2019 11:29 am
Reading this thread reminded me of a passage in Liar's Poker (Micheal Lewis)....
It's important to note that the money was not given directly to the employee, but rather paid directly to the creditor in question.

Yes, not a bad idea. Most of us have had an experience probably where we gave someone some money for a specific purpose and the person spent it on something else.

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Re: How to help an employee who is in debt and requesting a loan

Post by nobody123 » Mon Aug 26, 2019 9:40 am

Wildebeest wrote:
Sat Aug 24, 2019 9:27 am
BillWalters wrote:
Fri Aug 23, 2019 9:43 pm
I would gift the money and make it clear no additional help is available.
That is what I am leaning to. This will come out of my wife's personal account, not the business account ( our personal accounts are shared). I am concerned that other than making my wife feel better for the short term it will only create more issues down the road.
So how do you explain this to the IRS when they ask why you are paying your employee under the table? With no loan paperwork for prior gifts and then using your personal account to give an employee money, this smells like tax evasion. I know your wife's heart is in the right place, but what has happened has put the business at risk.

The only response you need to provide to the employee is "No." Full-stop. I would check with your attorney & CPA to properly pay the taxes on the "gifts to date" to make sure you're in the clear. You can always gross-up the gift amount so the employee is made whole at tax filing time. Then, write an official company policy regarding payroll advances that requires documentation.

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Re: How to help an employee who is in debt and requesting a loan

Post by dm200 » Mon Aug 26, 2019 9:44 am

Some organizations, such as local churches, may offer some kind of assistance and/or counseling - and this might help her.

Even if the OP's wife does provide a loan, coordinating with such an organization might help.

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Re: How to help an employee who is in debt and requesting a loan

Post by cshell2 » Mon Aug 26, 2019 10:01 am

I don't loan money to anyone, not even family or friends, so it would be a definite "no" from me. I can't even imagine asking my employer for a loan, but I work for a large company and they'd just look at me like I grew another head if I did and maybe point to my 401K and tell me to borrow against that.

I'm assuming this is a small company and your wife is close to her? I guess I might consider gifting from personal money if I had it, but 4K seems like an awful lot for car repairs and back to school expenses.

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dm200
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Re: How to help an employee who is in debt and requesting a loan

Post by dm200 » Mon Aug 26, 2019 10:05 am

I don't know why or what their "secret" is, but I have known several folks over the years who regularly help others with modest loans. They are usually paid back and, from what I have observed, have been a real help to many folks in real need of help.

I actually admire their ability to financially help others, without it becoming a problem - of the type cited here.

For some reason, over the years, I am very, very rarely asked to lend money to anyone.

oilrig
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Re: How to help an employee who is in debt and requesting a loan

Post by oilrig » Mon Aug 26, 2019 10:36 am

In the past when friends/acquaintances have asked me for money, I lied and said that I recently made a big purchase and was short on cash at the moment. Technically it was true, since I had just gone on vacation or something like that, but I did have excess funds I could have loaned them. I haven't been asked for money since. It also helps that I practice stealth wealth, very few people know how much money I have and make per year, most assume I live a normal lower middle class life.

Maybe you could say something similar to the employee? That even though your are the owner of the business, funds are tight right now with payroll, debt, mortgage, kids etc. Maybe a compromise would be loaning them a portion of the money like $1-2k, and let them know that this is the last time you will loan them money because you have some big expenses coming up.

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Re: How to help an employee who is in debt and requesting a loan

Post by smitcat » Mon Aug 26, 2019 11:08 am

I think I will post this again in greater detail in the hopes that it makes a difference.
You are a small business.
You have employees.
Preferential treatment of employees is never good business.
Preferential treatment of employees is often illegal.
Transferring any funds to an employee without proper taxes is illegal.
There is a difference between gifting to people that are not employees and those that are.
You already set a precedence that could lead to bigger problems.
What happens next may be a real problem....YMMV

rashad3000
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Re: How to help an employee who is in debt and requesting a loan

Post by rashad3000 » Mon Aug 26, 2019 11:09 am

Maybe I missed it, but has this family looked at chapter 7 bankruptcy? At least that would give them a fresh start.

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Re: How to help an employee who is in debt and requesting a loan

Post by Mr. Rumples » Mon Aug 26, 2019 11:29 am

Frankly, it was wrong for the employee to ask for the money the first time and now its a pattern. The employee is either blind to the situation it puts your spouse in or perhaps worse, doesn't care or wants to make it difficult.

As mentioned above, from fairness to other employees to legal employment and tax issues, the answer should be a firm no. If overtime is offered, it should not just be for this person but for everyone depending on job duties. Otherwise, relations with others will be affected.

This employee seems to have made a series of bad life decisions and now seeks to drag your spouse into it and even you since you are concerned. First, it was the repo, now its repairs, what's next a new furnace for the house, braces for a child? Unless the husband has a physical disability, there is no reason this time of year for him not to get out and mow lawns and clean gutters if need be and in a month or two rake leaves.

I suppose I have little sympathy, but when my father loaned us money as adults, he always had us sign a note and pay interest. He was perhaps overly concerned about the "tax man" looking at his business' books, but he wanted no tax problems. (In the end, near retirement, there was an IRS audit; he got a huge refund.) I'm glad he did it that way since it put us on notice to be adults when it came to money.

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Elsebet
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Re: How to help an employee who is in debt and requesting a loan

Post by Elsebet » Mon Aug 26, 2019 4:39 pm

In my opinion your initial response was fine but I'd take out the Dave Ramsey stuff unless you plan to offer it to all of your employees. I'd also make sure all the other employees are permitted to work up to 10 hours overtime per week before putting that part in and remove it if the intent was just to offer it to one employee. Your other employees are going to hear about these things and if I were an employer I'd be worried it would look like I was favoring this employee.

Since she did not repay the previous loan I would see this as a "Fool me once, shame on you, fool me twice, shame on me" situation.
"...the man who adapts himself to his slender means and makes himself wealthy on a little sum, is the truly rich man..." ~Seneca

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Re: How to help an employee who is in debt and requesting a loan

Post by MarkerFM » Mon Aug 26, 2019 4:53 pm

When I had my small companies, one employee who was a pleasant person with a messed-up family asked to borrow money I believe to buy a younger relative a computer. She paid it back, and I think borrowed another small amount that was repaid as well. She was in a low-level position and we actually kept her employed as an act of charity. Later, after I had sold the companies, she contacted me on social media requesting another small loan. I declined.

The moral of my story is, as others have mentioned, that the employee will keep coming back until you say no. It won't end otherwise. Up to you and spouse to decide what point, if any, that will be.

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Re: How to help an employee who is in debt and requesting a loan

Post by socaldude » Mon Aug 26, 2019 5:08 pm

Don't Do it !! You can give them a dave ramsey book ( buy used @ thriftbooks or amazon etc.), but don't loan them the money!! I did almost the same thing with family (yes) members. They were looking for a sucker ($3000) and they found me. They had already suckered other family members that I didn't know about. And "they work so hard waaaah waah". They also spend spend spend. They will not stop leeching off you. Millions of people have specil needs kids, do they all sponge off friends and family? No they don't. Don't do it. She will always be a hard worker AND someone who makes up for her lazy husband by ripping off ( yes I said it ) people close to her, she is worse than him. They all use the same tactics, playing on your sympathy. DON'T DO IT !!!

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Re: How to help an employee who is in debt and requesting a loan

Post by Freetime76 » Mon Aug 26, 2019 6:00 pm

As a lady, I can assure you that a loan would not have truly helped me/us when my husband was out of work and crises accumulated. The issue was in our house. I never in a million years would’ve asked.

The easy thing is to throw money at the apparent problem, but sometimes it is not help. Real help takes longer and more energy. I second those who suggested:
1a. Do not give or loan money. The answer is No.
1b. If you provide money at all, use it to directly pay a bill (a gift).
2. Decide on a company policy for all to be equal. Dollywood, in TN, has a fund where employees can apply for an emergency bill once a year - for anything at all...transmission, medical bill, heat...
3. Be very careful. People mired in problems aren’t at their best. A woman approaching a superior (male) in this situation is vulnerable, which makes what you do a business risk. Keep it at arms length, and better to let the pros handle it I.e. a social worker or community resource. I know, horrible to suggest :shock: and probably sounds mean.

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Re: How to help an employee who is in debt and requesting a loan

Post by sco » Mon Aug 26, 2019 11:38 pm

The door has been opened, it needs to be closed before the amount becomes big enough to cause problems between you two.

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Re: How to help an employee who is in debt and requesting a loan

Post by whodidntante » Mon Aug 26, 2019 11:50 pm

I wouldn't pay for a Dave Ramsey course or suggest it in any way. That dude oozes religion and your attempt at a kind gesture may open up the door to a civil rights lawsuit. My advice is not to get involved in the financial affairs of your employees. If you pay them fairly and on time, you've fulfilled your obligation.

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Re: How to help an employee who is in debt and requesting a loan

Post by Cyanide123 » Tue Aug 27, 2019 3:34 am

Agree with a lot that has been said. Offering overtime is an excellent idea - that is helping people help themselves. But I would not offer more over time than what your company NEEDS. Figuring out how much can be withdrawn from the 401k as a loan is again an excellent way out of a presumable tight situation. Giving one advance paycheck, and subtracting 10% from the next 10 paychecks to recoup that amount is another way to go. I would take this in writing, and of course if this person quits, you reserve the right to subtracting whatever amount is remaining from their last paycheck. But I would put a stop to more free money for an EMPLOYEE. This is not a personal relationship. This is a work place. The above will resolve the urgent need for funds. I would certainly think between these three options this person will be able to pay for any dire need circumstances. You do not know the ins and outs of every detail of this person's life. You do not know their spending habits, you do not know if they are continuing to waste funds.

I do not give money to someone i do not know on a very deep personal level. You could be fueling some very dysfunctional habits.

On a side note, some other thoughts on my end. Sorry these thoughts may be considered ramblings.

1) 4k for a car repair and school supplies is absurd. Assuming this is a crap unreliable car, it's value is probably less than what the repair seems to be costing. A transmission repair or engine repair costs 1.5k, that's probably some of the biggest repair costs that I can think of. That is an absurd amount of money for a car repair. A part of me feels it doesn't add up. I mean really...I could probably buy a used car from craigslist for 2000 dollars that runs okay. Back to school supplies - Visit a dollar store, plenty of stationary can be bought and you can spend little to no money. Most basic school supplies could probably be purchased for 20 bucks maybe at a dollar store. It really comes down to how much this person themselves is willing to push themselves to fix their own issues. Someone who says they are going to spend 4k on a car and school supplies is not attempting to minimize their cost and find cheap solutions to their problems. If the cost is 4K, this person hasn't yet been forced against the wall to come up with a cheaper solution in my humble opinion.

2) I was poor 10 years ago when I moved to this country for college. I lived on a dollar a day roughly for food. Ramen noodles every day - 16 cents. Peanut butter sandwiches - Dirt cheap. Found the cheapest possible living place, rode a cheap walmart bicycle ($79) to work and school (until that got stolen -_- then I just walked). Worked as much as I could while attending a top notch school (top 5 engineering school) and saved as much as possible while taking some 300-400 level courses as a freshmen. I didn't have proper winter clothing, purchased for $3 to 4 per item at goodwill. I didn't ask anyone for money (other than what my parents gave me initially when I moved - $5000 that went towards tuition and a plane ticket to the US). I was poor, and I lived like it. I pushed myself to live within my means, even if it meant a lot of personal sacrifice. I never asked my parents for help - I was willing to starve before asking for a hand out. I don't think this employee of your spouse has yet really pushed themselves to their limit. I don't know them, you don't either, maybe they have cut back on everything they could, maybe they havent? But 4K on a car repair and school supplies suggests they haven't truly sacrified yet from a needs vs wants perspective. They must learn to sacrifice wants before hoping someone will lend/give them money to fix their issue. But then again, I didn't have cancer or ridiculous health care bills, so I don't know this person's situation. Success is a mind set, it takes work and a lot of sacrifice of a lot of desires and sometimes needs in life, some people who live paycheck to paycheck, have a different mind set unfortunately.

3) I've given personal loans/gifts to 2 people in my life. Both I loved and knew inside and out and knew everything about them. The first, took 23 college credits of tough 300-400 level engineering courses, scored 4.0s, worked 40+ hours tutoring while taking those 23-24 semester credits. She never asked for a penny, but as her boyfriend then, when the college accounting department would send her late notices that she was late on tuition payments, I knew about it. I emptied out my savings account when it meant her being kicked out of college. She refused the money several times before I forced it on her. There wasn't much in there, she survived another semester, until eventually she had to take a full semester off, she worked for 80+ hours a week, saved money, came back, finished a chemical engineering degree in 2.5 years, graduated magna cum laude, worked for one of the top consulting groups, then did her MBA from harvard. She paid me back. She was always a rising star, I believed in her, knew her deeply in every way. I genuinely knew she did EVERYTHING and SACRIFICED whatever she could. The other woman I've given money to, we were together also, we've known each other 15 years now. She dropped out of school at 17 (in another country, not the US), and went out and made money to support her family. She came from a dysfunctional family - abusive father, she's been beaten by a belt countless number of times. She helped pay the bills when her mom couldn't for the 3 children after her parents got divorced (mom finally got the courage to leave the abusive relationship). She paid for her younger sister and younger brother's schooling and kept food on the table and a shelter over their head when she was 17-18. She worked like crazy, sacrificed her own education for her family. Today she's on the national news channel most days of the week, hosts a few TV shows here and there and has elevated her family to where her siblings graduated from college and are in the work force. I gave her 5-6k over the years, decent amount in the country where I'm from, when she was on the brink of homelessness. She has tried paying me back now several times, but I've always refused. Anyway, my point is, I knew these people, I loved them, I knew their character, I knew what they were made of. I knew they did every single thing in their power to excel at life. It was a very deep and personal relationship. That's NOT an employer and employee relationship. Your spouse has crossed that boundary, and it needs to be closed in a very professional manner. Support your staff with the above mentioned options, but don't give out free money or gifts, sometimes it enables people to continue bad habits. Unless you truly know everything in this persons life and you trust them with your life (which you probably dont ;) )

Sorry this was long and a lot of ramblings.
Last edited by Cyanide123 on Tue Aug 27, 2019 4:18 pm, edited 1 time in total.

Figuring_it_out
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Re: How to help an employee who is in debt and requesting a loan

Post by Figuring_it_out » Tue Aug 27, 2019 5:40 am

Dave would say you could get a serviceable care for less than 4000. It will be ugly as sin rust bucket and not good for cross country but will run to school and work just fine.

Sounds fishy to me.

My deal when someone ask me for money is they get a full blown personal finance review before it is given. I need to see documentation and a plan to pay me back. if that is too invasive for them then they are fully capable of managing their own finances without my help.

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Re: How to help an employee who is in debt and requesting a loan

Post by Vanguard Fan 1367 » Tue Aug 27, 2019 9:04 am

nobody123 wrote:
Mon Aug 26, 2019 9:40 am
Wildebeest wrote:
Sat Aug 24, 2019 9:27 am
BillWalters wrote:
Fri Aug 23, 2019 9:43 pm
I would gift the money and make it clear no additional help is available.
That is what I am leaning to. This will come out of my wife's personal account, not the business account ( our personal accounts are shared). I am concerned that other than making my wife feel better for the short term it will only create more issues down the road.
So how do you explain this to the IRS when they ask why you are paying your employee under the table? With no loan paperwork for prior gifts and then using your personal account to give an employee money, this smells like tax evasion. I know your wife's heart is in the right place, but what has happened has put the business at risk.

The only response you need to provide to the employee is "No." Full-stop. I would check with your attorney & CPA to properly pay the taxes on the "gifts to date" to make sure you're in the clear. You can always gross-up the gift amount so the employee is made whole at tax filing time. Then, write an official company policy regarding payroll advances that requires documentation.


I totally agree with that . The IRS likes you to pay taxes on money you give to employees. I know of several cases where folks got in deep financial trouble with interest and penalties on taxes owed but not paid in situations where employees didn't have enough paid to the IRS.

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Re: How to help an employee who is in debt and requesting a loan

Post by deikel » Tue Aug 27, 2019 9:48 am

All of this feels so wrong on so many levels:

- Although life happens, it should bleed into work as little as possible. I do not believe it is appropriate for both to mix much and for me it is a hallmark of a professional employee that these things do not mix (in a negative way, anyway)
- Although this employee might have all kinds of problems for all kinds of reasons - they are not your problem and you should not make them your problem. The contract you have with an employee is proper work for the salary agreed upon, no more, no less
- Your letter suggestion strikes me as arrogant. You are trying to change your employee in her behavior and make a couple of assumptions as to the underlying causes of her problems - which may or may not be true; in any case, changing peoples behavior once they pass the 10 year old mark is ambitious at best. There is a whole profession out there that makes good money in trying to modify peoples behavior - with varying success rates, even with people that go there voluntarily.

I would respectfully decline the loan request with no further arguments, ask for the pay back of the rest of the short term loan (you are still 250 USD short?) and confirm with her that she is still willing and able to work in the position (if she needs transportation, then no car is a hindrance, but again not your problem).

If you feel strongly about helping this person, then do so after the employment ended and expect that you will never see the money ever again. But I would suspect that if the label of employee is removed, you might still feel compassion for the situation this person is in (and thousands like her), but your willingness to act might be reduced. If so, then its a good indication that you should not have acted in the first place.
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Re: How to help an employee who is in debt and requesting a loan

Post by Ivygirl » Tue Aug 27, 2019 12:35 pm

whodidntante wrote:
Mon Aug 26, 2019 11:50 pm
I wouldn't pay for a Dave Ramsey course or suggest it in any way. That dude oozes religion and your attempt at a kind gesture may open up the door to a civil rights lawsuit. My advice is not to get involved in the financial affairs of your employees. If you pay them fairly and on time, you've fulfilled your obligation.
Yes, paying employees fairly and on time fulfills their obligation. However -

The employee/employer relationship, as it currently exists in 2019, is not the way society was organized for most of human history. The village or tribal model was how we organized ourselves, with the extended family/neighbors as the first level of support. Help was transactional and the degree of social closeness would dictate the size of the favor that could be reasonably requested. Women went - and still go - to other women to transact their social business regarding their family groups, perhaps more especially when the "paterfamilias" is absent, drunk, won't work, etc. This woman's husband won't support his family. She's trying to make up the deficit with her social network the way she would have 2000 years ago.

OP's wife (the employer) must resist being drawn into this kind of service of intimacy, for all the excellent reasons others have already given. Once in this circle, trying to get distance will probably lead to an emotional reaction of betrayal from the employee, who is playing by ancient rules of intimacy and sharing. So no preferential treatment. Don't send the signal that you are OK with transactions based on social closeness.

Mr. Dave Ramsey is actually a very good example of someone who will help anybody, without letting them cling on emotionally. Pastors do this every day, as do social workers, teachers, counselors. There are clear rules of behavior that anyone who counsels must observe to head off unwanted dependence. These rules have to be obeyed or bad things happen emotionally.

This is why earlier in the thread I suggested a voluntary collection in the workplace. This kind of help is personal (people she knows, who she can do favors for in return or show appreciation to), yet draws the line between employer and employees.

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Re: How to help an employee who is in debt and requesting a loan

Post by Tribonian » Tue Aug 27, 2019 12:54 pm

Is there a way for the workplace to provide a daycare or other facility that would not only benefit the autistic child specifically, but other employees’ kids as well?

If the older kids are working, they should be of an age to help the younger ones get ready for school.

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Re: How to help an employee who is in debt and requesting a loan

Post by dm200 » Tue Aug 27, 2019 1:04 pm

There are some folks, such as my sister-in-law, who are very "connected" with all kinds of services available to those "in need" and in similar circumstances. We now live a distance away from where I grew up, while my brother and sister-in-law still live in that area. I was amazed that my sister-in-law found some services for my late uncle and later father in some health/medical assistance matters in their last years.

If the OP can find such "well connected" folks, they may be better able than the OP's wife to successfully assist the woman - maybe with some degree of cooperation of the OP's wife.

Such folks might be social workers, community based outreach folks, church or religious based folks, etc. Many (perhaps most) such church and religious based assistance folks serve those in similar need regardless of that person's religious affiliation.

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Re: How to help an employee who is in debt and requesting a loan

Post by dm200 » Tue Aug 27, 2019 1:12 pm

This is a different "employee need" situation, but is an example of how an employer successfully assisted some employees - and was a win-win for everyone. I don't have all the details, but it went like this.

An employer in the financial services industry had employees with a wide range of salaries - from near minimum wage to relatively high. This employer engaged some kind of consultant to do employee surveys and management involvement of understanding employee needs. As a result, it came to light that there were much higher employee absences (lower compensated employees) on certain days - and there was a recurring pattern. It turned out that many such lower compensated employees did not have money just before paydays to put fuel in the car or pay for taking the bus to work. Once identified, the employer (working with some of the lower compensated employees) came up with a solution such that employee absences just before payday declined to the normal level. I cannot recall all the details - but it was not just to give everyone a raise.

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Re: How to help an employee who is in debt and requesting a loan

Post by galawdawg » Tue Aug 27, 2019 1:19 pm

Ivygirl wrote:
Tue Aug 27, 2019 12:35 pm
This is why earlier in the thread I suggested a voluntary collection in the workplace. This kind of help is personal (people she knows, who she can do favors for in return or show appreciation to), yet draws the line between employer and employees.
Respectfully, I'd be cautious about this approach as well unless: there is already in place a policy or standard practice involving soliciting employee donations and this situation qualifies under that existing policy or standard practice.

When it is the "boss" (OP's spouse) who initiates a "voluntary" collection in the workplace, many if not most employees view it as less than voluntary, particularly in a small organization. Also, if taking donations for employee needs (or wants) is not a standard practice at this company, it again presents a risk that other employees will resent this or see it as favoritism from the "boss". Employee comments or thoughts such as "when ___________ happened to me/my family, the boss didn't take up a collection" or "first the boss gave her a bonus/loan/gift that we didn't get, now the boss wants us to give our money too..." can easily lead to workplace dissatisfaction or conflict.

I still maintain that no funds should be given or loaned, the employer can advise the employee of options (if any) that they make available to all such as overtime or a 401k loan, and if the employee is dissatisfied with these options, it can be suggested that she look to her friends, family or community for any additional assistance.

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