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Debt Relief Options When You Can’t Pay Equipment Leases

You’re trying, to run your business: the best you can. But those leased equipment payments, they’re crippling your cash flow. What now? Don’t panic – there are options, even if returning that gear isn’t one.

Renegotiate the Lease Terms

First, talk to the lessor. Yes, that’s obvious – but follow this advice: don’t grovel, insist on revising terms. You hold leverage, as getting equipment back is a hassle (costly downtime for refurbishing and finding new clients).

What to Propose:

  • Extend the Lease: Add 1-2 years, lowering payments.
  • Defer Payments: Skip some to get cashflow relief.
  • Buyout at Residual: Pay the remaining balance now.
  • Temporary Rental Return: Store gear, pay modest fee.

“But,” you ask, “what if they refuse, to budge – and demand payment in full?” Firmly assert you CANNOT do that, period. It signals bankruptcy may follow, forcing return and fire sale of assets (way worse for them).

Chapter 11 Bankruptcy Reorganization

If lessors stay inflexible? Consider chapter 11. This scares many, but hear me out: it buys time to stabilize the business, under court protection from creditors. Here’s how it could help…

Restructuring Equipment Debt:

  • Extend Lease Terms: Up to 7-10 years potentially.
  • Lease Cram Downs: Reduce payments and interest rates.
  • Lease Stripping: Pay secured portion only, rest is unsecured.

Sure, bankruptcy is an extreme move. But by showing reorganization viability, a court could compel lessors to accept revised terms, letting you operate profitably again.

Litigation: Suing for Lessee Fraud

An often overlooked tactic? Review how leases were originated. Many lease brokers committed fraud or deception with:

  • Bait-and-switch financing costs
  • Hidden fees and charges
  • Misrepresenting bundle equipment’s condition
See also  Massachusetts Business Debt Settlement Lawyers

If such fraud happened? That’s grounds to sue, potentially unwinding leases or securing significant damages.

Sell Assets to Finance a Workout

Finally, if all else fails, consider selling expendable assets and using proceeds to negotiate lease termination payoffs. Calculate if a lump-sum offer of, say, 40 cents on the dollar might let lessors exit deals “okay,” versus costly bankruptcy battles.

“You took risks in business; the prospect of loss was there from the start. Losses have opinions too; searing opinions, crimson ones that linger long after their visit.” – Cormac McCarthy

Don’t just wilt under debt pressures. Explore all reinvention paths – leases can derail even good businesses. But take control: negotiate aggressively or pursue legal strategies. Always protect your lifeblood cash flow…so your business lives to fight another day.

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Our team is available always to help you. Regardless of whether you need advice, or just want to run a scenario by us. We take pride in the fact our team loves working with our clients - and truly cares about their financial and mental wellbeing.

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