Has your small business taken on too much debt? You’re not alone. Each year, many small business owners in Northern Kentucky find themselves struggling to meet their obligations and drowning in debt. Cutting down on spending or putting in your savings may not provide the relief you seek especially if you can’t seem to shake off collectors.
Here, we will discuss sustainable debt relief options you can consider to help you figure out the next course of action for your business.
Debt Consolidation
Debt consolidation, also referred to as debt management entails consolidating several debts into one manageable plan. If you choose this option, you manage the consolidation yourself or work with a credit counseling agency that can leverage their networks to negotiate for lower interest, fee and penalty waivers, and affordable monthly payments for you.
The downside to debt consolidation is that you may have to let go of all your credit cards until the debt is settled and this may hurt your credit score. Additionally, depending on how you consolidate your debt, you may end up paying more interest over time leaving you in a worse financial situation than before.
Debt Settlement
Debt settlement, also referred to as debt adjustment, offers debt relief for small business owners who can’t afford to pay their debts in full. The process involves paying a lump sum payment, usually much lower than what you owe to your creditor, with the agreement that they will cancel the rest of the debt.
The risk associated with debt settlement includes a decreased credit score since you pay a lesser amount of money than you owe. Failure to make payments on time will also lower your score, accrue interest and penalties, and leave you vulnerable to multiple collection calls.
Filing Bankruptcy
For small business owners, filing bankruptcy can feel scary. However, bankruptcy can not only help clear your debts, but in some cases, it can save your business and give you a fresh start.
The type of bankruptcy that small business owners can file depends on the business structure and whether the owner wants to keep the business.
The most common bankruptcy paths that small business owners in Northern Kentucky take are:
Chapter 7 Bankruptcy
In a Chapter 7 filing, the business owner — mostly a sole proprietor, is required to close the business and turn over the business assets to a bankruptcy trustee. The trustee liquidates the items and pays the creditors.
Chapter 11 Bankruptcy
A Chapter 11 bankruptcy gives a small business time to restructure the debts under more favorable terms and put in practical measures that can pull it through bankruptcy and continue its operations post-bankruptcy.
Chapter 13 Bankruptcy
A small business owner who is the only employee in their business can also file a Chapter 13 to clear both personal and business-related debts. You and your attorney can propose a repayment plan and negotiate to resolve some of the debt or extend repayment timelines. The good news is that it allows you to keep your business doors open.
Hire Experienced NKY Bankruptcy Lawyers to Save Your Business
If you need professional legal counsel to choose the right debt relief option for your business, contact W. Ron Adams Law. We have over 33 years of experience in helping find the best debt relief for small business owners in Northern Kentucky. Call us today to schedule your free business bankruptcy consultation.
