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Once we determine our program is right for you, we start working on your behalf. We conduct a thorough evaluation of the type of debts you have, and put together an action plan on what a realistic, and beneficial outcome would look like for each debt.

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The final step is the most important, we restructure your debt and put you in a better position than we found you. We work with you to adhere to the new debt restructuring program, and are with you every step of the way to make sure your business is thriving.

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$450K Merchant Cash Advance

Extra 24 Months

Transformed into a monthly payment, and extended by 2 years, with a 15% reduction in balance.
$110K Merchant Cash Advance

55% Reduction

Transformed into a monthly payment, and extended by 2 years, with a 55% reduction in balance.
$100k Business LOC

50% Redution

Our client had an LOC with a MCA hybrid lender, and saw a drastic reduction in balance.

How We Help

Business debt settlement through Delancey Street involves restructuring your corporate debt, in a manner that allows you to keep your doors open, and results in an increase in cashflow.

Get a affordable plan that works for your business cash flow as a part of the debt settlement process.

Get potential resolutions with Delancey Street in a timely and effective time frame once you enter our debt relief program.

You Have a Powerhouse team of financial and legal experts on your side, advising you on how to interact with predatory creditors.

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Business Debt Settlement

Getting Out From Under Business Debt – Options for Settlement

Running a small business is tough. You have to contend with all sorts of challenges – competition, regulations, managing employees. And of course, there’s always the specter of debt hanging over your head.It’s very common for small business owners to rack up debt. You might take out loans to get your business off the ground or to invest in new equipment and inventory. Or perhaps you rely heavily on credit cards or lines of credit to cover operating expenses during slow periods.But what happens when that debt becomes unmanageable? What if you fall behind on payments or max out your available credit? At some point, you’ll have to confront the debt and figure out how to get out from under it before it sinks your business entirely.

Understanding Business Debt Settlement

If you have a lot of debt that you realistically can‘t pay back, one option to consider is a business debt settlement. This is an agreement between you and your creditors to pay back less than the full amount owed.It works like this:

  • You stop making payments on the debts and allow them to become delinquent. This gives you leverage to negotiate a settlement since the creditors will prefer getting something over nothing.
  • A third-party debt settlement company contacts your creditors and negotiates to have a portion of your balance forgiven. Typically, settlements end up between 40-60% of what you originally owed.
  • You begin making lump sum payments, either in a few large chunks or installments over 6-12 months, until the newly agreed upon settlement amounts are paid off. At that point, the creditors consider the debts settled and stop pursuing you for the forgiven amounts.

Debt settlement can be an attractive option since it allows you to resolve debts for much less than you owed. However, it also comes with some significant downsides, like damage to your business credit score and legal implications in some states. We’ll explore all of this in more detail throughout this article.

Key Factors to Consider

If you’re thinking about pursuing business debt settlement, there are several key factors to consider first:

Type & Age of Debt

  • Debt settlement works best for unsecured debts like credit cards, lines of credit, and business loans or financing agreements.
  • Settling newer debt is often easier than debt that is more than 6-12 months delinquent, which creditors may be less willing to negotiate.

Your Payment Capabilities

  • Creditors will want to see that you have the means to make the settlement payments. If you can pay in a lump sum, that’s ideal. Installments may require proof of income/assets.

Settlement Company Reputation

  • Debt settlement companies charge fees but can smooth the negotiation process. Choosing an experienced, reputable company is vital.

Impact on Business Credit

  • Letting debt become delinquent damages your business credit significantly. This may limit financing options even after settlements.

Legal & Tax Implications

  • Some states prohibit or restrict settling credit card debt. Forgiven debt may be taxable income. Consult professionals to understand impacts.

Pros of Business Debt Settlement

If done successfully, business debt settlement offers a few potential benefits:

Resolve Debt for Less Than Owed

  • Settling for 40-60% of balances due allows you to pay back less than you originally borrowed. This conserves cash flow to reinvest in your business.

Avoid Bankruptcy

  • If the debt is severely delinquent, settlement may allow you to satisfy creditors without having to pursue bankruptcy. This gives you a better chance to rebuild business credit.

Buy Time to Improve Cash Flow

  • Once enrolled in a program, creditors will stop collections efforts, which buys you 6-12 months to improve your financial situation before settlement payments come due.

Reduce Stress & Avoid Litigation

  • Getting creditors off your back reduces stress and anxiety. Settling debt could also head off potential lawsuits from creditors trying to recover what they’re owed.

Cons of Business Debt Settlement

However, there are also several drawbacks of debt settlement business owners should be aware of:

Damage to Business Credit Scores

  • When you stop making payments, your business credit profile will take a major hit. Delinquencies remain for 7 years and severely lower your scores during this period.

Tax Consequences on Forgiven Debt

  • The amount of debt forgiven may be considered taxable income by the IRS. This could result in a hefty tax bill when you file your business returns.

Potential Collections & Lawsuits During Program

  • Although most creditors stop collections efforts once you begin a program, some may continue to pursue legal action to recover their money.

Debt Settlement Fees

  • Reputable settlement companies charge 15-25% of your enrolled debt as their fee for services. This adds to your overall costs.

Creditors May Refuse to Negotiate

  • There is no guarantee all creditors will accept partial settlement offers. They may continue collections against your business for full repayment.

As you can see, the decision to pursue small business debt settlement is not one to take lightly given the negative consequences. Business owners should think carefully to decide if the benefits outweigh the drawbacks for their specific situation.

Finding the Right Debt Settlement Company

If you do opt for settlement, finding an experienced debt relief provider to facilitate negotiations is key. Here are some tips on choosing a reputable company:

Look for Longstanding Providers

  • Established companies with a strong track record of results make the best partners. They have existing relationships with creditors and know how to negotiate effectively.

Check Credentials & Complaint Histories

  • Legitimate settlement firms should be accredited by organizations like the American Fair Credit Council. Review complaint records with consumer protection agencies to spot red flags.

Understand the Fees

  • Fees typically range from 15-25% of total enrolled debt but can vary by provider. Make sure you know all costs before signing up. There should be no upfront charges.

Confirm Flexible Settlement Options

  • Can they negotiate lump sum settlements and installment plans? This gives you multiple options to resolve debt in a way that matches your business’ payment capabilities.

The right settlement company will make the process of negotiating with your creditors much smoother. Take time to research and vet providers thoroughly before engaging their services.

Step-by-Step Debt Settlement Process

If you decide moving forward with settlement makes sense, here is a basic overview of what the process entails:1. Stop Making Payments

  • You’ll need to become delinquent on your debts to give creditors incentive to negotiate settlements. This will ding your business credit but gives you leverage.

2. Notify Creditors

  • Alert creditors that you’re working with a settlement firm and provide requested documentation so they can put accounts on hold.

3. Negotiate & Finalize Settlements

  • It may take some back and forth before both sides land on an acceptable settlement amount for each debt. Typically takes at least 90 days.

4. Sign Agreement & Establish Payment Schedule

  • Once settlement amounts are set, you’ll sign a legally binding agreement to repay under new terms. This may be lump sum or installments.

5. Make Settlement Payments

  • As long as you stick to the negotiated payment schedule, creditors will consider debts settled once paid in full and stop all collections actions against you.

Expect most business debt settlement programs to take around 6-12 months from start to finish. The process requires diligence from both you and the settlement firm to ensure smooth negotiations and positive resolutions with all enrolled creditors.

Deciding if Debt Settlement is Right for You

At the end of the day, determining if pursuing small business debt settlement makes sense comes down to weighing your specific situation and goals.

Settlement Could Work If:

  • Debts are becoming truly unmanageable
  • You have some ability to make lump sum or installment payments
  • You expect major cash flow improvements in 6-12 months
  • You’re willing to take the credit score hit

Avoid Settlement If:

  • Debts are reasonably manageable currently
  • You have limited income & assets to fund settlements
  • You anticipate seeking financing within the next couple years
  • Your main debts are secured (like an SBA loan)

As with any major business and financial decision, consult with accounting and legal professionals to understand how settlement could impact your company’s bottom line and future operations. If done strategically, it can provide much-needed relief. But if rushed into hastily, it may end up doing more long-term harm than good. Analyze the pros and cons carefully before moving forward.

Other Debt Relief Alternatives

If business debt settlement does not look like the right solution, a couple other options to consider:

Debt Consolidation Loan

  • Borrow money to pay off multiple debts, owed to a single lender at fixed rate over 1-5 years. Typically requires strong credit, assets to secure.

Chapter 11 Bankruptcy Reorganization

  • Court-supervised process to restructure debts and create repayment plan over 3-5 years. Best for larger companies with complex debt and need to continue operating. Legal/admin costs are high.

For most small businesses, however, debt settlement ends up being the more accessible middle ground between bankruptcy and consolidation financing. Just be sure to fully understand the risks before making any decisions.

Navigating Business Debt Settlement: A Helpful Guide for Small Business Owners

As a small business owner, I know how tough it can be to manage finances. When cash flow gets tight, it’s easy to rely on credit cards or loans to stay afloat. But that debt can quickly snowball, leaving you struggling to keep up with payments. If you find yourself in over your head, debt settlement may seem like an appealing option. But it’s important to understand both the risks and potential benefits before moving forward.

In this article, I’ll walk through the ins and outs of business debt settlement. My goal is to provide an honest, human perspective on the pros and cons so you can make an informed decision. I’ll also share tips on negotiating with creditors yourself or finding reputable settlement companies. My hope is that you’ll come away better equipped to tackle your business debt in a strategic way.

What is Business Debt Settlement?

Debt settlement involves negotiating with creditors to pay a lump sum that is less than the total amount owed. The creditor agrees to consider the remaining balance “settled” and stop collection efforts. This can be an alternative to bankruptcy or continuing with regular payments.

Settlement companies advertise that they can reduce debt by 40-60% on average. However, there are risks to be aware of. Your credit score will drop and creditors may sue you or continue harassing calls while you save up for settlements. Fees also range from 10-25% of enrolled debt, on top of any interest and late fees racking up.

That said, settlement can still provide relief if done strategically. The key is prioritizing which debts to target and having realistic expectations. Don’t believe promises of slashing debt in half with no consequences [1].

When Does Settlement Make Sense?

Settlement works best for unsecured debt like credit cards, medical bills, and personal loans. Debts with collateral like mortgages and auto loans are riskier. The lender can seize the asset if you default.

You need a lump sum saved up to make credible offers. This means settlement works best for debts with a small enough balance that you can save the funds within several months. That might be $3,000-15,000 on a credit card, not $100,000 on a business line of credit.

Settlement also makes the most sense when you have a reasonable plan to avoid racking up new debt. There’s no point settling current debts if you’ll just accumulate new ones.

Weigh the Pros and Cons

Settlement can provide meaningful relief, but also comes with costs. Consider these key pros and cons:


  • Settle debt for less than you owe
  • Stop accruing interest and fees on settled accounts
  • End creditor harassment and collection calls
  • Avoid bankruptcy which can liquidate business assets


  • Fees to settlement companies often 10-25% of debt
  • Credit score drops 100+ points on average
  • Continued late fees and interest while saving up for settlements
  • Creditors may sue you before settlements paid
  • Taxable income on forgiven debt

As you can see, there are advantages but also substantial drawbacks. Make sure you’re clear on both before making any decisions.

Understanding the Process

If you decide to pursue settlement, here is a typical timeline:

  1. Stop payments – You’ll stop making regular payments so you can save up for settlement offers. This will likely trigger late fees.
  2. Open dedicated account – Settlement companies require you to save lump sums in a dedicated account they can access.
  3. Wait for account to build – It takes several months to save enough to make credible offers.
  4. Settlement company negotiates – Once there are sufficient funds saved, the company negotiates with creditors.
  5. Creditor accepts or rejects offer – There’s no guarantee creditors will accept the initial offer amount.
  6. Settled debts paid off – If accepted, you pay the settlement amount and the account is closed.

Expect this to take at least 6-12 months. During that time, your credit score will drop, creditors may sue, and interest/fees accrue. Make sure you’re prepared for the consequences before moving forward.

Should You Hire a Settlement Company?

Settlement companies advertise that they can secure better deals with creditors compared to what you could negotiate directly. However, you need to vet companies carefully, as many overpromise and employ predatory tactics.

Watch out for any company that [2]:

  • Charges upfront fees before settling debts
  • Guarantees specific settlement amounts or terms
  • Advises you to stop communicating with creditors
  • Touts “new government programs” to erase personal debt

Reputable companies will offer a free consultation, charge fees only on settled debts, and provide realistic assessments of what settlements you can expect. Get promises in writing and read the fine print!

Alternatives to Debt Settlement Companies

Negotiate Yourself

You can negotiate debt settlements yourself directly with creditors. This allows you to avoid settlement fees. Success depends on your negotiation skills and the creditor’s policies.

Inform creditors you’re experiencing financial hardship due to COVID-19 or other circumstances. Ask what options are available, like reduced payments or interest rates. Don’t admit you don’t intend on paying the full balance, as this gives them less incentive to settle.

Non-Profit Credit Counseling

Non-profit credit counseling services charge small monthly fees to act as an intermediary with creditors to reduce interest rates or create debt management plans you can afford. They can be a good alternative to settlement companies.

Be wary of “credit counseling” services that behave more like for-profit settlement companies.


Filing for bankruptcy stops collections and can discharge some business debts. However, you’d lose control of the process. An experienced bankruptcy lawyer is best able to advise if this is a good option.

What Debts Should You Target?

All settlement offers depend on the specific creditor. But certain types of debts have higher success rates:

Credit Cards

Credit card companies would rather take a partial payment upfront than nothing at all if you’re headed towards default. They’re often willing to settle for 40-60% of the balance.

Medical Debt

Medical providers also commonly accept discounted lump sums, often 20-50% lower than what’s owed. Some may also have financial assistance programs.

Old Debt

Debt that is older than the statute of limitations in your state (often 3-6 years) can sometimes be settled for 10-30% of the balance. Collectors may prefer a small settlement over nothing.

Be prepared for each creditor to accept different offers based on their internal policies. Don’t assume across the board discounts.

What If Creditors Sue Me First?

It’s possible creditors may file a lawsuit against your business to recoup debts, even as you attempt settlement. This is a last-ditch recourse for them to get paid. If you’re sued, be sure to respond within the required timeframe, either personally or through an attorney. You can still negotiate settlement or payment plans, often for a reduced amount. Ignoring a lawsuit will allow them to obtain a default judgment against you.

The Impact on Your Credit

Debt settlement will negatively impact your credit score. Accounts will likely be closed or charged off. Late payments will show up on your credit report. Your score could drop 100 points or more.

However, creditors will also stop reporting the settled debts. So over time, as long as you avoid new debt, your score can recover. But it may take several years.

The Tax Implications

One hidden consequence of settlement is that forgiven debt is treated as taxable income by the IRS. If a creditor forgives $10,000 of debt, you may owe taxes on that $10,000.

Certain exceptions apply, like if you are insolvent or bankrupt. But make sure to understand the potential tax liability, which could reduce the savings from settlement.

How Much Should You Offer Creditors?

There are no hard rules on exact settlement amounts, since it depends on each creditor. But based on typical accepted offers, aim for:

  • Credit cards: 40-60% of balance
  • Medical debt: 20-50% of balance
  • Old debt: 10-30% of balance

Lowball offers are often rejected while offers too close to the full amount remove creditors’ incentive to settle. Start on the lower end and negotiate up as needed.

Final Tips on Navigating Settlement

If you move forward with settlement, keep these tips in mind:

  • Get everything in writing – Verbal promises won’t cut it.
  • Send dispute letters – This can freeze collections until settled.
  • Keep meticulous records – Track all debts, fees, and settlements.
  • Set aside funds for the tax man – He’ll want his cut on forgiven debt.
  • Consult a tax pro – They can advise you on reducing tax liability.

Debt settlement is a major decision with consequences. But armed with the right information, you can make the best choice for your business. Wishing you the very best as you chart a path to financial stability.

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