The Waterses' Plan

Peter and Carolyn Waters have big debts and no savings.

They can’t afford their lifestyle.

Time is slipping away.

Carolyn Thomasson liked many things about the profile she spotted on Match.com in September 2002. She liked Peter Waters' photo and the fact that he enjoyed travel. She especially liked that he owned his own business. Financial security was important to Carolyn, a long-time divorcée living in Charleston, S.C.

Uninterested in remarriage in prior years—“I didn’t want to put my kids through the dating scene,” she recalls—Carolyn had supported her four children with various jobs, from retail sales to babysitting. “I’m Lebanese. A strong family and a strong work ethic are central to our culture,” she says.

But at 56, with the kids grown, Carolyn was open to finding a life partner. She e-mailed Peter, attaching her own photo.

A widower since the previous year, Peter, then 58, owned Chocolate Perfection in Oyster Bay, New York, a business he and his late wife, Irene, started in their garage in 1982. The company manufactured private-label confections for high-end department stores such as Neiman Marcus and Saks to sell and for businesses to give away as promotional gifts. The company prospered, and Peter and Irene, childless, enjoyed their six-figure annual profits to the hilt, spending on luxury cars, artwork, jewelry, and fine dining. “We acted like people in our 30s, even as we approached our 60s,” says Peter. “We didn’t think much about the future.” Alone after Irene’s sudden death at age 58, he was pleased to hear from Carolyn. “Gee, you’re cute,” he replied, “but you’re so far away. How are we going to hang out?”

They managed. Within a few months, Peter had moved himself and his business to Charleston. The two married in June 2003. Unfortunately, financial security has eluded the couple. With a combined annual income of $84,300, they are virtually insolvent. Due to business reversals, Peter has become an employee of the company he once owned. Carolyn manages a local furniture store. Burdened with heavy debts, a lifestyle they can’t afford, and a dwindling timeline for turning things around, they are struggling to retool their lives.

A Fateful Loan

When a 1998 fire devastated the 4,000-square-foot warehouse then housing Peter and Irene’s chocolate plant, they used the opportunity to grow their business. They moved to a space five times larger and invested in new equipment. The $200,000 insurance settlement from the fire fell short of the expansion costs, so the pair got a $125,000 loan from the Small Business Administration (SBA).

Irene’s unexpected death in 2001 created more than a personal loss for Peter. “The terms of the SBA loan meant the $95,000 balance came due right away,” he says. “I renegotiated the contract, but my overhead was high, business was slow, and I couldn’t keep up.”

In early 2003, he defaulted, and the SBA soon obtained a court judgment against him. Peter’s reaction: “I was in love with Carolyn by then and burned-out on New York anyway, so I decided to relocate.”

Peter was able to sell his New York home, his main asset other than his business equipment. He netted $100,000 and—despite the court judgment, which has not been enforced to date—used it to move himself and his business south.

A Maxed-Out Lifestyle

Initially, the couple lived in Carolyn’s three-bedroom townhouse. Then, in July 2004, they sold it for a $40,000 profit and bought a $314,000, four-bedroom home in nearby Mount Pleasant, putting in just $30,000 as a down payment. Because the SBA judgment against Peter had been reinstated in South Carolina, Carolyn had to get the mortgage in her name alone—and she succeeded, even though the monthly payment on the $284,000 loan (at 6.5 percent, fixed, for 15 years) was $3,180, more than her take-home pay on her $44,000 salary. The couple counted on Peter’s income to cover the rest along with all other necessities of life and such extras as trips to visit Carolyn’s family, a country club membership, and cable TV.