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Hawaii Business Debt Relief Lawyers: Navigating Legal Options for Struggling Companies

Running a business in Hawaii can be tough. The high cost of living, shipping costs, and other economic factors make it hard for local companies to stay afloat. When businesses fall behind on payments or take on too much debt, owners may need help from legal experts who understand Hawaii business debt relief options. This article covers common debt problems for Hawaii companies, legal defenses, and pros/cons of different debt relief strategies.

Common Causes of Business Debt in Hawaii

There are many reasons Hawaii businesses take on more debt than they can handle. Some common causes include:

  • High rents and real estate costs. Commercial leases in Hawaii run $3-4 per square foot in most areas – much pricier than other parts of the U.S. Even on neighbor islands, rents are 50-100% above U.S. averages.
  • Shipping costs. Importing raw materials and exporting products from Hawaii costs around twice as much as other coastal states. This cuts into margins.
  • Low inventory. With limited suppliers on-island, Hawaii retailers often can’t buy in bulk. Small inventory means less cash flow flexibility.
  • Natural disasters. From hurricanes to volcanic eruptions, disasters can destroy inventory and force closures. Recovery costs strain finances.
  • Seasonal revenue. Tourism drives Hawaii’s economy, so many businesses earn uneven revenue year-round. Slow seasons lead to cash crunches.
  • High taxes and healthcare. Hawaii businesses pay some of the highest taxes and healthcare costs nationwide. This leaves less profit.
  • Predatory lending. Some lenders charge excessively high interest rates and fees, trapping borrowers in debt cycles.

With thin margins and fluctuating income, Hawaii businesses may resort to high-interest loans or rack up late payments on bills. It’s easy to fall behind, even when revenue bounces back. Business owners should watch for early signs of debt problems and meet with attorneys to discuss relief options.

Common Legal Defenses Against Debt Collectors

When creditors and collection agencies come calling, Hawaii business owners have legal defenses to buy time or reduce payouts. Common defenses include:

  • Statute of limitations. Debt collectors can’t sue to recover old debts past Hawaii’s statute of limitations – 6 years for written contracts, 4 years for oral contracts.
  • Improper service of process. If collectors don’t properly serve notice before a lawsuit, the court may dismiss the case.
  • Unregistered debt buyers. Debt buyers must register in Hawaii before attempting collections. Violations may invalidate the debt.
  • No proof of assignment. Collectors must provide proof the original creditor assigned them the debt. Without evidence, they may lack standing.
  • Disputing validity. Debts can be disputed if there are errors or discrepancies. Collectors must then validate the debt.
  • Usury claims. Hawaii caps interest rates on loans. Excessive rates may be usurious and unenforceable.
  • Harassment claims. Collectors cannot harass or threaten consumers. Doing so violates state and federal law.

An attorney can review debts and raise appropriate defenses to resolve collection accounts on favorable terms. Timely legal help improves outcomes.

Pros and Cons of Common Debt Relief Options

If legal defenses don’t fully resolve debts, Hawaii business owners have options like debt settlement and bankruptcy. Here’s an overview of pros and cons:

Debt Settlement

Debt settlement involves negotiating lump-sum payoffs below the full amount owed.

Pros

  • Settle debts for 30-50% less than the balance
  • Avoid bankruptcy and foreclosure
  • Stop collection calls and lawsuits
  • Pay off debts faster than installment plans

Cons

  • Damages credit until debts are settled
  • Collectors may balk at offers and sue anyway
  • Upfront fees for settlement companies
  • Possible tax liability on forgiven debt

Chapter 7 Bankruptcy

Chapter 7 bankruptcy liquidates assets to pay creditors, discharging remaining debts.

Pros

  • Eliminate most unsecured debts entirely
  • Stop foreclosure, repossession, garnishments
  • Receive immediate automatic stay protection
  • Discharge debts in 3-6 months

Cons

  • Shut down the business permanently
  • Lose nonexempt property and assets
  • Difficult to obtain new financing after bankruptcy
  • Tax liability if discharging tax debts

Chapter 11 Bankruptcy

Chapter 11 allows reorganization and restructuring of debts while continuing business operations.

Pros

  • Negotiate repayment plans matching income
  • Retain ownership and control of business
  • Discharge or reduce portion of debts
  • Automatic stay halts collections/lawsuits

Cons

  • Complex and expensive process
  • Requires regular income to fund repayment plan
  • Risk of conversion to Chapter 7 liquidation
  • Stigma of bankruptcy may impact operations

Finding the Right Attorney for Your Situation

The best debt relief solution depends on each business’s unique circumstances. Qualified attorneys in Hawaii thoroughly assess each case and explain all options. Look for an attorney who:

  • Focuses exclusively on debt relief and bankruptcy law
  • Has helped other local Hawaii businesses successfully resolve debts
  • Takes time to answer your questions and explain pros/cons
  • Customizes proposals to your specific business needs
  • Charges reasonable, transparent fees
  • Makes themselves available via phone, email, and in person

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Our team is available always to help you. Regardless of whether you need advice, or just want to run a scenario by us. We take pride in the fact our team loves working with our clients - and truly cares about their financial and mental wellbeing.

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