Whether it’s a business debt or a personal debt, owing money is a weight you never want to bear. If your business debt is large enough, you might be considering filing for bankruptcy. Thankfully there are a few alternatives available that can keep “filed for bankruptcy” from appearing on your financial file.
Doing Absolutely Nothing
It might sound odd, but doing nothing at all about your debt might work in your favor. That being said, you should know that this option isn’t without its share of risk and comes with a big might. It’s likely that creditors will target your business assets in order to collect on your debts, but they might decide otherwise if the overall legal costs outweigh the advantages. You’ll likely receive correspondence in the mail from your creditors, but there’s a chance they won’t follow through with their threats. You should only consider this strategy if you don’t own very much in the way of business assets and you’re not personally liable for your business debts.
Get Your Debt Priorities in Order
If you have multiple debts, it’s best you pay off the ones with the highest interest first. This doesn’t mean ignoring your other debts. You’ll want to take care of all of your minimum debt payments and devote anything extra you have left over towards cards or debts with the highest interest rates. One thing to keep in mind with this tip is that you’ll also need to put your focus on paying debts with personal guarantees. You don’t want to risk losing your personal assets while gaining financial freedom.
Shutting Down Your Business
While this may not be an ideal scenario, it’s still one that may keep you from filing for bankruptcy. If you’ve amassed a great number of assets over the years, you might be able to get a good price for them if you sell them on your own rather than let a creditor claim them instead. Once you’ve sold your assets and have taken care of your debts, anything that’s left over is yours to do with as you like, such as restocking your business. One caveat with this route is that you don’t want to sell off any of your assets below a fair market price. The reason for this is that you’re obligated to minimize loss for your creditors.
By liquidating your business, you could settle with your creditors for less than you actually owe. The reason for this is the price of litigation can quickly become expensive, and creditors are likely to get more money out of you this way than they would if they were to force you into bankruptcy. Something to keep in mind with liquidating your business is that the IRS may hit you with a tax liability.
Talk With Your Creditors
Simply informing your creditors of your business’s current financial situation could help. It’s possible there’s a hardship program for which you qualify. If not, you can always ask for a payment plan or at least a smaller settlement amount. In any case, make it clear that the smallest amount they’re willing to accept or the more they can lower your debt, the easier it will be for you to successfully take care of your debt. You’ll also want to make sure you’re actually able to pay the amount you propose. One of the worst things any business owner can do is default on a repayment plan, especially one created by the business owner.
Bankruptcy should always be the final option when it comes to taking care of business debts. While you may not like any of the above options, or they might not be perfect, they can save you an abundance of future frustration and additional financial problems.
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