Getting Your Business Out of Debt

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Avoiding Bankruptcy as a Way to Deal With Debt When You Own Your Own Business

How would you like to get out of debt for about 50 cents on the dollar? Is that possible? You bet, and we will go over exactly how in just a moment.

Although there is very little that is good that can be said about the economy the past few years, if there is one bright spot, it is this: Creditors seem more willing than ever to work with solopreneurs, entrepreneurs, small business people, and the self-employed who are indebted to them.

What do you do if you are in over your head financially? Negotiate.

Credit card companies especially can get a bad rap, and most of it is unjustified. Look, everyone loves their credit cards when they need them, but they get mad when it costs them too much money (sort of like lawyers, eh?) But in fact, credit cards are popular for many good reasons:

  • They provide easy access to credit, often when it is needed most
  • They can be used for almost anything, as opposed to other forms of credit which usually have strings attached
  • They are easy and convenient

Many people are upside down financially because they borrowed too much, thought the good times would last, and they are now stuck with bills for things that were once affordable, but are not anymore.

Negotiating Your Debt Down When You’re Self-Employed

So what do you do if you are in over your head financially with some creditors and you want to avoid bankruptcy?

Negotiate, that’s what.

In an economy like this you just may find that your creditors will be more willing than you think to work out a settlement with you. You can in fact often settle for, yes, 50 cents on the dollar, or less.

If negotiating a reduction in your debt is of interest to you, here’s what you do:

1. Make a list of all of your debts: When people get into financial trouble, there is a natural tendency to hide from the facts, but if you want to deal with your creditors you have to make a list of how much you owe whom. For each creditor list the principle and interest, along with their phone number.

2. Get a lump sum together: This is the hard part. Creditors have little reason to settle with you if you can’t pay off the settlement amount in fairly short order – say a month or two at the most. No, we don’t know where you will find the money, but we do know you need access to some – from a relative, friend, or wherever – if you want to be successful in this process.

3. Smile and dial: Get on the phone with each creditor and tell them that you want to negotiate a settlement. Offer 25 cents on the dollar. They will moan and cry. Then they will counter-offer. If you can offer a lump sum settlement, expect to end up at around 50% of what you owe – sometime a little more, sometimes a little less.

4. Get it in writing: Before making any payments, get each creditor to sign a document, yours or theirs, that says they are agreeing to the agreed-upon settlement amount as payment in full for the debt and that you will have no further financial obligations to them. You may want to speak with a lawyer about this part or get a copy of a suitable settlement agreement. Make sure too that your credit report will reflect a zero balance.

5. Pay: Pay as agreed and say goodbye.

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