Negotiating Debt Settlements While Going Out Of Business

Whenever a business closes, it mostly has a good pile of debt on its shoulder. The debts are revolving around the business team and the landlords, service providers, utilities, suppliers and even with a private lender or a bank. Now, the choice is yours. You either have to make a plan to pay the bills in full or just settle them for an amount less than what you borrowed previously. Or, if you want, you can file for bankruptcy. There is another possible approach to this thought. You might want to ignore debt and your creditor’s phone. The thought might be tempting but don’t go for that. It might results in repo people, lawsuits and years of legal cases under your name.

negotiating debt settlements while going out of business

Start Negotiating Deals on Business Debt:

If you assume that you don’t have the money to pay in full, then the next question is related to the smaller amount they might settle for. As you probably know by now, it solely depends on the creditor type, legal details of debt and creditor’s attitude. An example might help you clarify the matter a lot more.

If your business is a corporation or LLC without personally guaranteed debts, creditors will know that they don’t have option to collect money from your firm personally. So, they can easily accept smaller portion of what your business stands for as their complete payment. On the other hand, if you owe debt personally, or if a friend or relative co-signed the loan form, that will give creditors way more leverage than usual.

The Right Statistics to Follow:

No matter whatever the legal status of your current debt might be, if you end up paying around 30% to 70% of cash, then it is worth giving debt settlement a try. Before that, you can go through some of the authentic debt settlement reviews to learn more about the benefits involved with the case. Any creditors know they have to go through some hard time to collect debt from you. They, to avoid any confusion or hassle later, might want to settle your debt for around 50, 60 and 70% of actual amount. If you have lawyer to help, you can lower the percentage even more.

Start Prioritizing the Debts:

If you have pledged any personal assetas collateral, and you are planning to keep it, you might want to pay the debt first. After paying the main debt, you need to shift your focus towards paying benefits and any wage owed to employees. After that, lastly you have to pay loans, which you are liable for personally, mostly related to court judgments.

After that, if you have any money left, you can use it to pay to your credit card companies, suppliers, and bills for some random business expenses like travel, advertisement, entertainment and more, and even lease deficiencies. You might even have to repay dues and subscriptions, maintenance, repair and more. There are various ways to handle creditors and their requirements. It is time to find it out.

Negotiate with Equipment Lessors:

Whenever you are sure that your business is running out of work, you should immediately start making arrangements to return the leased equipment like machinery, copiers, vehicles and more.

  • If you can return equipment before the lease term is over, you won’t be held liable for remainder of payments in lease term or even for early return penalty.
  • There is no fear in at least trying to negotiate for a better deal, when you still have hands on rented equipment. For example, you can just try returning forklift to the company with additional payments of two months, just to release you of any further obligations.
  • In case you have hefty amount at stake and the lessor is not at all willing to negotiate, you can consider taking help of a lawyer. You can possibly get into the field of bankruptcy then. It will be of great help as no lessor wants to cope with any bankruptcy court.

Trying to Negotiate with Secured Creditors:

Before you turn for your property to secured creditor, you can try to negotiate with him to release you from owing any deficiency. If you can successfully complete a negotiation then it’s all good.  In case, you fail to cover up a negotiation and still owe money to the creditor, then the deficiency will be like any other unsecured debt.  It won’t be a secured call as you have already returned the collateral.

cards wallet

When Negotiating with Unsecured Names:

After notifying your unsecured creditors that your business is doomed, chances are high that you might receive calls from them, demanding to get their money back. Most of the time, it is important to state that you are preparing for fair settlement offer and will be in touch with the creditors. It might take few weeks to determine the exact amount you owe and the divisions of cash between creditors.

  • After collecting outstanding A/R and selling off your equipment and inventory, you will at least have some money to settle the debt or even discuss for a settlement.
  • In case you are working with few creditors, you can easily explain your terms personally or over the phone. You have to explain them carefully that your business cannot produce any money. So paying the amount in full is impossible. Just to be on the good terms, you are ready to settle your debt partially.
  • If your creditors accept your partial offer, then it is a good start. Get a letter signed from the creditor where it will be mentioned that they have cleared you out of all the dues from your name.

In case you are handling more than few creditors, then presenting settlement in writing is a clever call. Be sure to mention in the letter the amount you are paying s percentage of the settlement. Remember to mention that every creditor will receive same percentage and each one has to sign a settlement before the money gets transacted. If the task is pretty darn tough for you, experts are down to help.


Anthea Scordilis

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