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Are There Business Revenue Requirements to Receive Debt Relief?

Many small business owners have found themselves struggling with overwhelming debt over the past few years. Between the impacts of the pandemic, supply chain issues, inflation, and rising interest rates, keeping up with financial obligations has become increasingly difficult for some entrepreneurs.

As a result, more and more business owners are exploring debt relief options like debt settlement, debt management plans, or even bankruptcy. But an important question arises – are there any revenue requirements to qualify for these debt relief programs if you run a business?

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Debt Settlement Revenue Requirements

Debt settlement involves working with a debt settlement company that negotiates with your creditors to reduce your total owed debt amount. The debt settlement company usually requires you to stop making payments on the debts they are settling and instead put money aside in a separate account to eventually make lump-sum settlement offers.

Most debt settlement companies do not have firm revenue requirements or thresholds to meet. Instead, qualification is typically based on your total debt amount compared to assets and income.

That said, having steady business revenue can improve your chances of debt settlement success. Creditors will want to see that your business generates enough income to make the proposed settlement offers over time.

The more revenue your business reliably brings in, the more confidence creditors will have in settling – rather than pursuing full repayment plus interest and penalties over many years.

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So while formal revenue minimums may not exist, higher revenues still help in practical terms.

Debt Management Plan Revenue Requirements

Debt management plans (DMPs) are offered by non-profit credit counseling agencies. These plans consolidate your unsecured debts into a single monthly payment, often with reduced interest rates or waived fees.

As with debt settlement, debt management plans do not publish formal business revenue requirements. Instead, the credit counseling agency will work with you based on a complete review of your financial situation, including business and personal debts, income, assets and expenses.

Steady business revenue is extremely helpful for successfully sticking to a debt management program over 3-5 years until you become debt-free. The agency wants to see your business generates enough net income to cover your planned DMP payment alongside other needs.

Without consistent business earnings, you may struggle to maintain DMP payments month-after-month. But again, there are no stated minimum revenue levels.

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Business Bankruptcy Revenue Thresholds

Declaring business bankruptcy is the most formal debt relief option and does involve firm revenue standards in order to file.

The primary business bankruptcy choice for small companies is Chapter 11 reorganization. Under Chapter 11, you work out a court-approved plan to repay all or part of your business debts over 3-5 years.

To qualify for Chapter 11 as a business, you must meet two revenue-related legal requirements:

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  1. Regular income. Your business must have regular and stable cash flow coming in. While the law does not define an exact dollar amount, around $50,000 per year is often cited as a common benchmark.
  2. Maximum debts. Your business’s total secured and unsecured debts cannot exceed approximately $2,725,625. Again, this threshold adjusts over time for inflation.

Meeting both the regular income and maximum debts criteria allows your business to file Chapter 11, enact automatic stay protection against collections, and negotiate a repayment plan with creditors.

Without satisfying these revenue standards, you may need to consider liquidation under Chapter 7 instead. So for bankruptcy in particular, clear business revenue minimums do exist.

Key Takeaways on Debt Relief Requirements

While formal revenue levels are not defined for debt settlement or debt management, having steady and sufficient business income will always help in practical terms when working through these debt relief options.

Only Chapter 11 business bankruptcy includes explicit revenue standards in order to legally file and negotiate with creditors. Approximately $50,000 per year of regular cash flow plus maximum debts under $2.7 million are typical thresholds.

Overall, do not let revenue concerns stop you from at least exploring debt relief. Programs focus more on your unique financial situation. And getting free consultations from non-profit credit counseling agencies or reputable debt relief companies is always wise before deciding your best path.

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