Starting a small business almost always entails taking on some debt. Unfortunately, however, businesses don’t last forever, and some businesses close before they’ve had a chance to pay their debts. When this happens, it often leaves small business owners wondering what they can do about their outstanding debt. In this article, we examine whether it is possible to settle small business debt in California.
Will Creditors Settle Small Business Debt?
Whether a creditor will settle small business debt depends on a variety of factors, including the type of creditor, the type of debt, and the creditor’s attitude toward overdue debts. However, creditors that agree to settle small business debt often do so for anywhere from 30% to 70% of the balance owed.
Small Business Debt and Personal Liability
An important factor to consider when it comes to settling small business debt is whether you personally guaranteed any of your business debts. If not, then creditors will understand that their options are limited regarding collecting from you personally, and this may increase their willingness to settle for a percentage of what you owe. On the other hand, if you have personally guaranteed your small business debt, then this increases the amount of leverage creditors have over you.
Prioritizing Business Debts for Settlement
When it comes to small business debts, you should aim to first settle or pay off those debts that you have obtained by pledging one or more personal assets as collateral (if you want to keep the pledged property). After addressing these debts, you can move ahead to other types of debt.
Settling With Secured and Unsecured Creditors
Before turning over any business assets to a secured creditor, you should first attempt to negotiate to avoid maintaining a balance on your account. Doing so will provide you with much-needed leverage until the deal is complete. And after you’ve sold off equipment and inventory and collected any accounts receivable, you may have some cash available to begin settling your remaining business debts.
Settling with Business Equipment Companies
Finally, if you are still in possession of leased business equipment, you should make arrangements to return it. When you return business equipment before the term of your lease is up, this can limit your liability for the remainder of the payments owed for the lease term.
Hire a California Debt Settlement Lawyer
If you’d like to settle your small business debt, the most important thing you can do is contact a California debt settlement lawyer. At the Fullman Firm, we provide debt settlement services to clients throughout the state of California. When you come to us for help, we will diligently pursue the settlement of your small business debt. If you are ready to take the first step towards settling your debt, please contact our California debt settlement lawyers to schedule a free consultation.
