When you find that your business is carrying too much debt that you are sure you will be unable to repay then there are two available options in front of you. However, you will need to be wise enough to choose between these two options after weighing the pros and cons of each and also your future.
The options that you can avail are:
- Go for debt settlement or consolidation and keep your business running or
- If all options and resources are exhausted, allow your business to fail and roll the shutters down.
In both the cases you will need expert tips and suggestions and therefore you are recommended to consult with a nonprofit credit counseling agency, a debt advisor or even a bankruptcy lawyer for that matter.
Allowing Your Business to Fail
Reluctantly, if you want to give up the idea of owning a business finding yourself too much in debt, there are a few ways in which you can let your business to fail and still get some respite and salvage some reputation though nothing is as satisfying as being the owner of a successfully running business.
When you want your business to fail if it is on life support with debts that you cannot manage, it is wise to give some time to think so that the shutdown process is orderly. It is very risky and may often lead you to further legal obligations if you simply lock the doors and walk away. You will then surely be sued by creditors, employers, and anyone to whom you owe money. They will certainly go after your personal assets and legally so to get back their money due. Therefore, the most feasible ways to shut down your business are as follows.
- Bankruptcy should be your last resort when you want to close down your business due to unmanageable debts, it needs special mention and hence comes on top of the list. A Chapter 11 bankruptcy is a process in which you can salvage a company especially if the business debt challenges are temporary. This is a viable option for a viable company. However, bankruptcy is always an expensive and very complex process. It requires the services and expertise of an experienced bankruptcy attorney to be successful in making it the most viable option for reducing your burden of business debt. It will also require that your business assets have a much lower worth as compared to your total debt amounts. This will allow you to pay only the value of the assets and not the total balance due.
- Selling your business is another way and is ideally the first option of many business owners who struggle with their business debts and cannot pay off their lenders. If you sell your business you will get enough money to pay off your lenders. However, instead of selling off a large number of assets to multiple buyers it is better to deal with a single buyer as it will be an easy process with fewer hassles and arrangements to make. Moreover, a complete sale of your business will also relieve you from future obligations, legally and financially once you pay off your creditors with the sale proceeds. However, if your business debt is more than the worth of your business assets you may not find a buyer in that case.
- Liquidating your assets should be your next option along with negotiating with your creditors to distribute the assets in the process. Ideally, most creditors find it more reasonable to accept a reduced amount rather than the full balance of the debt. This is because the litigation processes involved in these situations are far too expensive that the amount, they could have forgiven not mention the time factor separately. Moreover, if the situations force you to declare bankruptcy then they might receive even less or nothing at all. You must know at this point that if you have guaranteed personally a business debt as many lenders often require it especially for a small business owner, then this personal responsibility for loans or lines of credit will still be liable for your obligations unless it is freed by your creditors.
- You can even declare a Chapter 7 business bankruptcy and turn over your business to the bankruptcy trustee. This trustee will sell the business assets and collect any outstanding bills receivable. With the amount gathered they will pay off the owed taxes and distribute the remaining funds if any to the creditors. Ideally, a Chapter 7 personal bankruptcy will eliminate the business debts guaranteed personally and allow you to break clean from your failed business.
However, just as other bankruptcy a Chapter 7 bankruptcy will also damage your personal credit rating and reflect the negative impact for seven years.
Business Debt Settlements
If you want your business running you must know that shutting down your business is not the only way to get rid of your debts which you feel is unmanageable. However, no debt is unmanageable and it is never late to start managing your debts.
In today’s economic setting you will find a lot of debt settlement companies, credit counselors and other nonprofit debt relief organizations that are ready to help individuals as well as businesses in debt.
Anyone in high debt condition may hire their services to bring down their debt bill as well as the interest rates. According to the debt settlement reviews, several people and business owners who are about to file for bankruptcy have found luck and a new leash of life by hiring the services of these agencies in exchange for a fee or for gratis.
Though a settlement will mar the credit history but it will also put your business in a rebuilding phase if you continue to make the payments arranged on time. It is advisable to try and settle your debt which will pull down your debt bill by at least 40 to 60%.
You may also try consolidating your loans if you want to carry on with your business without damaging the credit score.
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