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Looking for business debt relief services? Visit Delancey Street.

Business Debt Settlement: An Overview

Dealing with business debt can be overwhelming. Unpaid bills pile up, creditors call nonstop, and you feel like you’re drowning with no relief in sight. But there are solutions available to find your way out of debt, restore your financial health, and save your business. Business debt settlement is one potential path forward when facing unmanageable business debts.

What is Business Debt Settlement?

Business debt settlement, also called business debt negotiation or settlement, is the process of negotiating with creditors to pay off debts for less than what is actually owed. It involves working with a settlement company to act on the business’s behalf to negotiate deals with creditors.The goal is to settle accounts for a fraction of the outstanding balance – often between 40-60%. This allows the business to resolve what they owe at a discounted amount they can realistically afford to pay. It helps them avoid bankruptcy or other more drastic measures.

When Should a Business Consider Debt Settlement?

There are a few key signs that a business may benefit from debt settlement services:

  • The business is struggling with high monthly payments and falling behind on bills
  • Creditors are calling about late or missed payments
  • The debt has been sold to aggressive collection agencies
  • The business can no longer keep up with minimum payments
  • Bankruptcy seems inevitable without relief

Essentially, debt settlement is most useful for businesses facing severe financial hardship and realistically unable to pay back what they owe in full. It’s about finding an affordable way out when all other options have been exhausted.

The Debt Settlement Process Step-by-Step

If a business determines debt settlement could be their best path forward, here is an overview of what the process entails:

1. Initial Consultation

The first step is to have an initial consultation with a reputable debt settlement company. This involves an in-depth review of the business’s finances to fully understand total debts owed. The company then provides tailored advice about the viability of settlement based on the business’s specific situation.

2. Retainer Agreement

If settlement seems feasible, the business will sign a retainer agreement engaging the settlement company’s services. This contract outlines the company’s responsibilities as well as fees for their work negotiating settlements on the business’s behalf.

3. Open Dedicated Account

A key part of the process is opening a dedicated bank account that will be used specifically for accumulating settlement funds. Each month the business makes set payments into this account over the course of the program.

4. Stop Paying Creditors

Once signed on with the settlement company, the business stops making payments directly to their creditors. This is imperative for gaining leverage in settlement negotiations down the road.

5. Negotiations & Settlements

This is where the “magic” happens. The settlement company leverages the funds saved in the dedicated account to negotiate deals with creditors. The goal is settling outstanding balances for 40-60% less than actually owed.As accounts get settled, the business continues putting money away until enough has accumulated to resolve their remaining debts. It takes diligence and patience to work through the process.

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The Benefits of Debt Settlement for Businesses

There are many potential upsides for businesses that pursue debt settlement, including:

  • Avoids Bankruptcy: Settlement allows businesses to resolve debts without having to pursue bankruptcy – which has severe long term consequences.
  • Saves Money: With successful settlements, businesses resolve debts for significantly discounted amounts, saving 40% or more compared to paying in full.
  • Stops Harassing Calls: Once in a program, collection calls stop, allowing the business owner peace of mind.
  • Brings Accounts Current: Settled accounts can be brought from past due to current standing once paid. This helps credit and operations.
  • Prevents Lawsuits: Settlement helps avoid potential lawsuits from creditors trying to collect on unpaid debts.

For businesses facing truly unmanageable debt burdens, settlement can provide much needed relief and a chance to move forward on stable financial ground again.

Understanding the Drawbacks & Considerations

While settlement offers many benefits, business owners should also weigh a few drawbacks and considerations, including:

Fees: Reputable settlement companies charge 15-25% of the total enrolled debt amount in fees for their services. This is only paid if settlements are secured.

Tax Implications: Forgiven debt through settlement is treated as taxable income, so businesses should budget for this additional tax payment.

Credit Score Impact: Debt settlement leads to additional missed payments and delinquencies, resulting in credit score damage that can last for years.

No Guarantee: Settlement companies can only promise to negotiate the best deals possible, but cannot guarantee any specific settlement amount. Outcomes depend on each creditor.

Lawsuits Still Possible: Although less common during settlement, some creditors may still pursue legal action to attempt to collect on debts owed.While settlement facilitates debt reduction, it also takes an emotional toll through difficult months of financial discipline. Business owners need grit and commitment to power through challenges and get accounts resolved.

Questions to Ask Settlement Companies

If considering debt settlement for your business, asking the right questions upfront is key to picking the best partner:

  • How long have you been in business? Look for 5+ years experience.
  • What is your settlement success rate? 75%+ is solid.
  • What is your average settlement amount? 40-60% is reasonable.
  • What are your total fees and when are they collected?
  • Can you provide client references I can contact?

Vetting credentials, client reviews, experience, and understanding the full scope of services and fees helps business owners pick the best fit settlement company.

Our Business Debt Settlement Services

Here at ABC Company, we’ve helped over 500 businesses across the state settle over $45 million in debt over the past 10 years. Our team can conduct a free consultation, review your situation, and put together a customized action plan to help negotiate your debt balances down to affordable repayment amounts that fit your budget.

Why Businesses Choose Us

If you select us as your settlement partner, here’s what sets us apart:

  • Free consultation and plan proposal
  • Over 85% settlement success rate
  • Discounted fees for struggling businesses
  • Hands-on service and accountability
  • Member of the American Fair Credit Council
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We understand the frustration and despair that massive business debt can create. Let our decade of experience negotiating on behalf of business owners lighten your load so you can get back to growth and stability.

Still Have Questions? Let’s Talk.

While debt settlement can be a lifeline for struggling businesses, it also involves many personal financial considerations. We encourage you to learn more and get professional advice tailored to your unique situation.Our team is always available for a free, no obligation consultation and action plan proposal. We’ll review your specific debt balances, budget, and goals to determine if settlement may be a good fit.Give us a call at 555-123-4567 or request a consultation through our website to get started. We’re here to help your business make progress and find financial peace of mind.

Frequently Asked Questions About Business Debt Settlement

Many business owners have questions about the debt settlement process and how it may help their unique financial situation. Here we’ll tackle some of the most common FAQs:

1. Is debt settlement right for my business?

Every business’s situation is different, so it’s impossible to give a blanket recommendation about settlement. In our free consultation, we’ll conduct an in-depth financial review and provide candid advice about whether settlement is likely your best path forward based on your specific circumstances.In general, settlement works for businesses that have unmanageable debt balances but want to avoid bankruptcy. It makes the most sense when you’ve exhausted all options and can no longer afford minimum payments. Our job is to give you an honest assessment about whether we can realistically help improve your situation through negotiating discounted payoffs.

2. How much can debt settlement save my business?

On average, our clients settle their debts for around 50 cents on the dollar, saving 40-60% off their total balances. For example, if you owe $100k across multiple accounts, we may be able to negotiate settlements that resolve everything for $50k or less in total payments.The exact amount depends on each individual creditor, type of debt, and the business’s specific financials. But significant savings are possible with a successful settlement program.

3. How long does business debt settlement take?

The debt settlement timeline stretches 12-48 months for most businesses we work with. It takes time to accumulate enough funds to negotiate optimal settlements, requiring discipline and commitment. During the program, the business makes consistent monthly contributions to their dedicated settlement account until all debts are addressed.The pace of settlement depends on the total debt amount and the business’s available resources to save. But we strive to resolve accounts as quickly as possible once viable offers can be made.

4. Can debt settlement hurt my business credit?

Business debt settlement will likely have a negative impact on your business credit reports and scores. When you stop making payments to creditors, those accounts become delinquent and fall further behind, incurring late fees and penalties. Missed payments show up on credit bureau reports.However, for many businesses considering settlement, their credit is already damaged from previously missed payments before they seek help. And the only other option is bankruptcy – which is catastrophic for business credit and ability to access affordable financing.So while settlement may worsen credit profiles in the short term, resolving debts for less allows businesses to rebuild stronger financial health and credit over time. Most owners feel the credit impacts are worth it to avoid bankruptcy and get back on stable footing.

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5. What debts can be settled for my business?

Common business debts that can be addressed through settlement include:

  • Business credit cards – Visa, MasterCard, AMEX
  • Equipment financing loans
  • Commercial real estate and property loans
  • Business lines of credit or term loans
  • Accounts with vendors, suppliers, contractors
  • Business taxes – payroll, income, sales tax

Settlement works best for unsecured debts like credit cards or personal guarantees. Other business loans can also be negotiated in some cases depending on the lender. Our team has experience settling a wide variety of business account types.

6. Can I negotiate business debts myself?

Attempting “do-it-yourself” debt settlement is very difficult for business owners. You need extensive expertise in financial negotiations, specific knowledge of creditor guidelines and settlement terms, and rigorous tracking of details over months.The settlement process is also very time consuming, which most business owners can’t spare while trying to run their company. Informal attempts to negotiate often yield unfavorable outcomes compared to using a professional firm.Our dedicated staff handles all negotiations completely on your behalf. We use proven tactics and leverage to get the maximum debt relief benefits possible out of the process. Trying settlement DIY puts your business at risk of leaving money on the table or failing to resolve debts before legal action.

The Bottom Line

Unmanageable business debt reaches a tipping point where the struggle gets too exhausting. Settlement provides a chance to resolve what you owe at reasonable amounts before it’s too late. While not an easy process, shedding the full burden of debts you can’t afford to pay allows you to rebuild and move your business forward again.If you relate to the business debt settlement scenarios we’ve covered, our team encourages you to request a free consultation. We’ll be honest about whether settlement is likely in your best interest, and provide specific advice tailored to your situation. There’s no obligation to get started.Hopefully this overview gave you direction on how settlement works, its many benefits, and what to consider if it may be the right choice for your business. Let us know if any other questions come up! We look forward to helping guide you

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