Kansas Business Debt Relief Lawyers
Business Debt Relief Lawyers: Your Guide to Settling Business Debt
Starting and running a business can be extremely rewarding, but it also comes with financial risks and responsibilities. Many businesses take on debt to get started or expand operations – things like business loans, lines of credit, and equipment financing. But when cash flow gets tight or unexpected circumstances arise, meeting those debt obligations can become very difficult. That’s where working with an experienced business debt relief lawyer can help.In this article, we’ll explain what business debt relief lawyers do, who needs their services, the debt settlement process, and the pros and cons of settling business debts. We aim to provide a helpful overview so you can determine if debt settlement is the right path forward for your company.
What is Business Debt Settlement?
Business debt settlement, also known as business debt negotiation or relief, is the process of working with creditors to pay off less than the full amount owed. A business debt relief lawyer acts as an intermediary to negotiate reduced payoff amounts on the company’s behalf.Settlements typically range from 40 to 60% of the total debt, sometimes even lower. Once a negotiated amount is agreed upon and paid as a lump sum or via an installment plan, the creditor considers the remaining balance paid in full. The debt is then discharged.Business debt settlement can be used to resolve:
- Business loans
- Lines of credit
- Commercial mortgages
- Equipment financing agreements
- Business credit card debt
- Accounts payable
- Commercial lease obligations
- Business judgments
- Tax debts
Debt settlement does not apply to secured debts where the creditor can seize assets, like auto loans or equipment financing with liens. However, once repossession occurs, any remaining deficiencies may possibly be settled.
When Do Businesses Need Debt Relief?
There are many scenarios where hiring a business debt relief lawyer makes sense, such as:
- Revenue declines due to economic downturns, industry changes, loss of major clients, supply chain disruptions, etc. This leads to insufficient cash flow to cover all debts.
- Unexpected emergencies like natural disasters, lawsuits or other legal issues, damage to facilities or equipment, theft, etc. These circumstances divert money towards recovery efforts rather than debt payments.
- Growth opportunities arise but require capital. Existing debt obligations prevent financing new expansion plans.
- The business has been burdened by excessive debt due to poor financial management or overly ambitious growth.
- The business owner faces personal financial difficulties that spill over into the company.
- Creditors won’t provide relief or renegotiate terms, and legal action is threatened.
Essentially, debt settlement becomes an option when a business realizes it cannot feasibly meet all of its debt obligations in full. The goal is to resolve debts in a manageable way and avoid consequences like lawsuits, judgments, repossessions, evictions, and wage garnishments.
The Business Debt Settlement Process
If you decide to pursue debt relief, here are the typical steps a business debt relief lawyer will guide you through:
- Review debts and conduct analysis: The lawyer analyzes the types of debts, amounts owed, creditors involved, payment status, assets at risk, and the company’s financials. This assessment determines the best path forward.
- Advise on best approach: Based on the analysis, the lawyer will recommend whether settlement, bankruptcy, or other options are preferable. If settlement is chosen, they’ll project realistic outcomes to set expectations.
- Set up debt management account: An account is established to collect and disburse lump sum settlements or installment payments. Creditors are notified to direct collections to the lawyer rather than the business.
- Initiate negotiations: The lawyer contacts creditors to propose settlements, typically starting with the most urgent debts first. Multiple rounds of negotiation occur until acceptable deals are reached.
- Finalize and execute settlements: Once terms are agreed upon, the lawyer finalizes deals and disburses settlement payments from the debt account. Executed settlements legally discharge the remaining balances.
- Ongoing reviews: Throughout the process, the lawyer periodically reviews outcomes and makes adjustments as needed. Additional negotiations may also be required over time.
The length of the settlement process varies case by case based on number of debts, creditor cooperation, and company finances. Many businesses see the first settlements within three months, with the overall process spanning six months to a year.
Pros of Business Debt Settlement
There are many potential benefits to settling business debts with the help of a lawyer:
- Avoid bankruptcy: Settlements allow businesses to resolve debts without resorting to bankruptcy and its long-term consequences.
- Eliminate debt: Successful settlements legally discharge remaining balances, reducing or eliminating debt entirely.
- Improve cash flow: Lower payoff amounts free up cash flow that can be redirected towards growth and operations.
- Stop collections: The lawyer handles communications and negotiations, stopping creditor harassment.
- Prevent legal action: Settlements remove threats of lawsuits, judgments, repossessions, evictions, and other creditor remedies.
- Protect assets: By satisfying debts, assets like equipment, property, and inventory are no longer at risk of seizure.
- Save money: Settling for pennies on the dollar is far less costly than paying full balances.
- Tax benefits: Certain tax deductions and credits may be claimed on discharged debt.
- Preserve credit: Settled accounts remain on credit reports but are noted “paid in full for less than full balance”. This is better than defaults.
- Relief and peace of mind: Burdensome debt is resolved so owners can focus on business operations.
Cons of Business Debt Settlement
While often beneficial, business debt settlement also comes with some downsides to consider:
- No guarantee of success: Creditors are not obligated to accept reduced payoffs. They may refuse or counter higher.
- Fees: Lawyers charge fees for their settlement services, whether flat rate, hourly, or contingent on savings.
- Tax liabilities: Discharged debt may be treated as taxable income. Certain exceptions apply.
- Credit score impacts: Accounts typically remain on credit reports with settled status. Scores may drop initially before recovering.
- Balloon payments: Lump sum settlements can be difficult to fund depending on available capital.
- Ongoing collections: Negotiations take time. Creditors may continue collections until settlements are finalized.
- Interest and penalties: Debts continue to accrue interest and late fees until paid off. Settlements do not include these added costs.
- Lawsuits still possible: Creditors could sue before or during the settlement process. Lawyers can defend against litigation.
- No secured debt relief: Settlements do not help with mortgages, auto loans, equipment leases, etc. Foreclosure, repossession, and seizures could still occur.
Finding the Right Business Debt Relief Lawyer
The success of a debt settlement depends largely on the skill and experience of the lawyer. Here are some tips for finding the best attorney to negotiate your business debts:
- Search state bar associations for certified lawyers specializing in debt relief, creditor negotiations, and business law.
- Verify licenses to ensure lawyers are registered and in good standing.
- Look for longevity in practicing law and specifically debt settlement for businesses.
- Ask about capacity to take on new clients and dedicate time to your case. Busy lawyers tend to negotiate better deals faster.
- Request case examples to understand the lawyer’s settlement success rates and savings ratios.
- Check ratings and reviews from independent attorney rating services and past clients.
- Compare fee structures. Options include flat fees, hourly billing, and contingency fees based on savings. Understand all pricing and costs.
- Meet for a free consultation to discuss your situation and evaluate compatibility.
- Check for bankruptcy expertise in case settlement fails and bankruptcy becomes the better path.
- Look for full-service support beyond negotiations, like debt management accounts, tax planning, credit repair, and ongoing legal advice.
- Seek empathy and commitment to your situation and needs. Look for lawyers who listen and explain things in understandable ways.
Alternatives to Business Debt Settlement
If debt settlement does not look like the right solution, talk to a lawyer about alternatives like:
- Debt consolidation loans – Combine multiple debts into a single lower payment loan
- Business credit counseling – Credit counselors work with creditors to reduce interest rates and payments
- Debt refinancing – Replace short term debt like credit cards with longer term lower interest debt
- Business bankruptcy – Court supervised process to eliminate qualifying debts under Chapter 7 or Chapter 11
- Out of court liquidation – Sell assets to pay debts and dissolve the business outside of bankruptcy
- Payment plans – Work directly with creditors to negotiate extended payment timelines
- Collections defense – Lawyers can defend against litigation and negotiate with creditors pre-lawsuit
- Corporate veil piercing – Separate business owner liability from corporate debt obligations
The right approach depends on each company’s unique situation. A business debt relief lawyer can objectively weigh all options to determine the optimal strategy.
Running a business comes with financial ups and downs. When debts become unmanageable, business owners should not struggle alone. Seeking help from an experienced business debt relief lawyer can facilitate settlements that minimize or eliminate burdensome debts.While not ideal, debt settlement is often the most strategic path that protects assets and cash flow while avoiding the severe consequences of bankruptcy and lawsuits. Just be sure to consider both pros and cons, research lawyers carefully, and compare all alternatives before committing.With the guidance of a skilled debt relief attorney, your business can regain solid financial footing, free up capital, and get back to growth. Don’t wait until it’s too late. If your business is burdened by debt, connect with a lawyer to discuss your options today.