If you have a huge pile of debts it is likely that you will have to close your business down. However, this does not mean that you can go scot free leaving all those debts behind. According to the law, you are responsible for paying your debts. As a business owner, you may owe a lot of money to several people collectively called your creditors including:
- Landlords of your business or office premise
- Suppliers of raw materials and other goods
- Utility bills
- Different service providers
- A bank or even
- A private lender.
You will have to notify all these creditors about your intent and the upcoming closure. This will in a way limit your liability. Apart from that, you will also have to follow several other steps such as:
- Making plans to pay these bills either in full or settle them for a lower amount than the actual amount outstanding and
- Considering filing for bankruptcy if the financial situation is really bad and does not allow you to make such payments
You should never take the easy and most tempting route of ignoring your debts and hoping the same from your creditors. They will not leave you and you may have to spend the next couple of years answering to collection calls from the creditors and debt collectors, face the repo people, meet the lawyers, and confront lawsuits.
The best way to go for is settling your debts by negotiating with your creditors. If you go through the reviews and debt settlement feedback from several other business owners who have faced similar situations like you before, you will see that they are better off now both financially as well as mentally. Therefore, come out of your shell and make the call to your creditors for a fair and reasonable debt settlement through negotiation.
Negotiating deals on your business debt
When you want to negotiate for a reduced payment with your creditors assuming that you cannot pay all of them in full, the natural question that arises is, who will settle for a less amount and how little will they settle for.
Well, as you may have guessed, it all depends on the type of creditor in question and their attitude. It also depends on the legal details and aspects of your debt.
- For example, if your business is a corporation or an LLC and you do not have any personally guaranteed loans, the creditor will know that there is no way in which they can collect their dues from your personal assets or savings. In such a situation, it is highly likely that the creditor will be more willing to accept a reduced amount of your business debt fearing that they may lose it entirely otherwise.
- On the other hand, if you have a personal guarantee debt or even worse if a relative or a friend cosigned for the debt, it will give the creditor a lot more leverage to collect the amount due in full from these alternative sources and that too legally that’s why we know about smokey Robinson net worth
However, irrespective of the legal status of your debts, if you can negotiate successfully with your creditors you can easily pay 30% to 70% cash on your debt which is why debt settlement is worth trying. The creditors know that once you are out of business it will be very hard for them, if not impossible to collect the debt in full. Therefore they will agree to settle your debt for 50, 60, or even 70 cents on the dollar. If you hire a lawyer to negotiate for you, chances are higher that you will have your debts reduced even further than that.
- Nevertheless, you must keep in mind at this point that it will not be a worthy move if you try to settle one or two small debts for a reasonable amount. Your focus should be getting the larger debts settled as that will save you more money. It is, therefore, necessary that you prioritize your debts first and then go for settling them.
- Apart from that, it will also make a lot of sense if you convey the message to your creditors that the offers made by you are conditional and depends on whether or not of your creditors respond to your offer and agree to settle your debts for a significantly lower amount.
- You may also use bankruptcy as your tool to lower your debts and make the creditors understand that you are desperate to get out of your debts. Well, bankruptcy should be your final option when you find that you cannot pay off any or most of your debts. This will wipe off those debts that you do not have any hope of paying in the near or distant future.
If your business owes a large number of debts it cannot pay, then bankruptcy will provide it with scope to start afresh again. However, you must always consult an experienced layer for a second opinion to decide whether bankruptcy will be feasible for your business or should you go for a bankruptcy-like alternative.
Different ways for negotiating
There are different ways in which you can negotiate with different creditors such as:
- While negotiating with equipment lessors you must make arrangements to return the leased equipment before the lease term is up. However, you may be liable for an early return penalty or have to pay the remaining amount of the lease. Therefore, negotiate a better deal while you still have the equipment.
- While negotiating with secured creditors, make sure the creditor releases you from owning a deficiency as this will be much like an unsecured debt as the collateral will be returned.
- While negotiating with unsecured creditors simply explain that you are preparing a fair settlement offer and you will be in touch.
If the creditors accept, make them sign a release for the entire loan amount in exchange for a partial payment. This release is critical as that will prevent the creditors to make any future claims. It is advised that you involve a lawyer as that will immediately raise the seriousness of your negotiations.
