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Business Debt Settlement Program


Negotiating Debt Settlements When You Go Out of Business

Going out of business can be an extremely difficult and stressful time. You’ve poured your heart and soul into your business, only to have it fail. Now you’re left trying to pick up the pieces, which includes dealing with potentially massive amounts of debt. Negotiating settlements on this debt may seem overwhelming, but with some preparation and perseverance, it is possible to reach agreements that significantly reduce what you owe.

Understanding Your Debts

The first step is gaining a full understanding of exactly what debts your business has incurred. Pull together all past due invoices, credit card statements, loan documents, lines of credit, and any other financial obligations. Review the terms of each debt, including interest rates, late fees, and penalties. Also determine which debts are secured (backed by collateral like equipment or property) versus unsecured.Unsecured debts like credit cards, accounts payable to vendors, unpaid taxes, and personal guarantees on business loans will likely be easier to negotiate down versus secured debt. However, even secured lenders may be willing to make concessions if they believe foreclosing or repossessing collateral will be difficult or not worthwhile.

Timing Your Negotiations

Ideally, you want to start settlement talks before debts become severely delinquent, like over 120 days past due. Creditors will be more motivated to settle if they believe it increases their chances of recovering at least some money versus if they feel the debt is essentially lost already.However, waiting until you’re at least 90 days late on payments gives you more leverage in negotiations. Collectors view debts over 90 days as much riskier and tougher to collect on. Offering a lump sum settlement is more appealing to them versus no guarantee of future payments.

What You Can Offer Creditors

Having a lump sum of cash available is almost essential for negotiating effective settlements. Creditors will want at least some payment upfront in return for forgiving the remaining balance. Depending on factors like your past payment history and their confidence in collecting, you may be able to settle debt for 50 to 70 cents on the dollar or even less by paying promptly in cash.If you don’t have readily available funds, you may need to explore options like borrowing from retirement accounts, friends and family, home equity loans, or selling assets. Any amount you can offer upfront shows good faith and improves your negotiation stance. Just beware of taking on new debt to pay off old debt.

Negotiating with Secured Lenders

For secured debts like equipment financing or loans backed by real estate, your negotiation strategy will focus on getting the lender to waive deficiencies and release liens on collateral. Offer to voluntarily surrender collateral in saleable condition in return for cancellation of the debt.You can also propose a short sale if property like commercial real estate secures your loan. This involves the lender accepting a discounted payoff from the proceeds of selling the property versus forcing you into foreclosure. Having a buyer already interested in the property makes short sales more enticing to lenders.

Settling with Unsecured Creditors

Unsecured creditors like credit card companies and vendors have fewer options for forcing repayment. As a result, they’re often more willing to settle debt for a fraction of what’s owed if they believe it’s the best outcome.Start by explaining you’re shutting down the business and want to offer fair settlements to resolve outstanding debts. Be prepared to show documentation of your financial difficulties. Don’t admit to fraud or other wrongdoing, but emphasize your good faith desire to repay what you can.Expect creditors to start high in proposing settlement terms. You’ll need to negotiate down to an acceptable percentage, like 50 to 70 cents on the dollar. Remind them that bankruptcy would result in much lower recovery. Get any settlement in writing before sending payment.

Seeking Professional Help

Negotiating business debt settlements yourself can be grueling and complex. An experienced commercial debt settlement attorney or debt resolution company can take this burden off your shoulders. They’ll assess your unique situation, then negotiate aggressively on your behalf for maximum debt reduction.This professional assistance does come at a cost, usually a percentage of debt savings. However, the increased settlements they can secure often outweigh their fees. They also know how to negotiate within the confines of debt collection laws.

Other Options if Settlements Fail

If you’re unable to negotiate satisfactory debt settlements, bankruptcy may become your best recourse. Chapter 7 liquidation discharges most unsecured debts while allowing you to retain exempt assets. Chapter 11 reorganization also provides options for dealing with secured debts.An attorney experienced in small business bankruptcies can advise if either of these options makes sense. They’ll help develop a strategy to protect your personal finances as much as possible after dissolving your business.

Key Takeaways

  • Gain a complete understanding of all outstanding business debts and their terms
  • Time settlement talks to maximize negotiation leverage
  • Offer lump sum cash payments in return for reduced balances
  • Voluntarily surrender collateral to secure lenders to facilitate settlements
  • Emphasize desire to make fair offers to unsecured creditors
  • Consider hiring professionals to negotiate optimal settlements
  • Explore bankruptcy if satisfactory agreements can’t be reached

Going out of business saddled with debt feels overwhelming. But taking a strategic approach to negotiating settlements can help you move forward financially. With persistence and creativity, you can likely reduce debts to a much more manageable level.

Business Debt Settlement

Businesses of all sizes can find themselves struggling with debt for a variety of reasons. An economic downturn, unexpected expenses, cash flow issues, or poor financial management can all contribute to a business taking on more debt than it can readily repay. When facing unmanageable business debt, owners have a few options to resolve the situation. One potential path is business debt settlement.

What is Business Debt Settlement?

Business debt settlement involves negotiating with creditors to settle on paying a lump sum that is less than the total amount owed. It aims to resolve debt for less than the full balance. The creditor agrees to accept the reduced payoff as payment in full and forgives the remaining amount. This can help provide relief for businesses facing burdensome debt obligations.

Business debt settlement concept image

There are a few key characteristics of business debt settlement:

  • It involves negotiating directly with creditors or using a settlement service
  • The goal is to pay off debt for less than the total balance owed
  • Settled debt is typically paid in a lump sum rather than installments
  • Settling can leave a negative impact on business credit scores

Business debt settlement provides an avenue for businesses to resolve unmanageable debt while avoiding bankruptcy. It can help owners move forward when facing burdensome financial obligations.

When is Business Debt Settlement a Viable Option?

Business debt settlement can be a viable option when a business has more debt than it can realistically pay off. Typical situations where owners may explore debt settlement include:

  • The business has missed payments and fallen behind on debt
  • Interest charges and fees have caused balances to balloon
  • The business has poor cash flow and cannot keep up with payments
  • Creditors have turned accounts over to collections agencies
  • Bankruptcy is not desirable for the business

Debt settlement allows businesses to resolve debt they could not otherwise repay in full. It provides an alternative to bankruptcy, which can lead to total business failure. However, business owners should also consider the potential drawbacks before pursuing settlement.

The Business Debt Settlement Process

The specific debt settlement process can vary, but generally involves the following steps:

  1. Assess debts and determine eligibility for settlement – The business owner reviews all outstanding debts and evaluates if settlement may be an option based on type of debt and creditor policies.
  2. Stop making payments – The business stops making monthly payments so debts fall further behind, which can motivate creditors to settle.
  3. Negotiate with creditors – The business negotiates directly or uses a settlement firm to negotiate reduced lump sum payoffs.
  4. Come to settlement agreements – Creditors accept settlement offers to receive a portion of the balance owed.
  5. Obtain financing – The business obtains financing from savings, loans, or investors to fund the settlement amounts.
  6. Pay settlements – The business pays the negotiated settlement amounts as lump sums to each creditor.
  7. Receive forgivenesses – Upon receiving settlement payments, creditors forgive the remaining unpaid balances.

This allows the business to resolve debts for pennies on the dollar. However, there are costs, risks, and consequences to weigh before pursuing settlement.

Pros and Cons of Business Debt Settlement

Business owners should carefully consider the potential pros and cons of pursuing debt settlement:

Potential Pros

  • Resolve debt for less than the full amount owed
  • Avoid bankruptcy and potential business failure
  • Put an end to harassing creditor phone calls
  • Stop accruing interest and fees on debts
  • Improve business cash flow after settlements

Potential Cons

  • Hurt business credit score and ability to get financing
  • Lose business assets pledged as collateral on debts
  • Owe taxes on amount of debt forgiven
  • Pay lump sums can be difficult to obtain
  • No guarantee that all creditors will settle

Weighing these factors helps determine if settlement aligns with business goals and capabilities.

Key Factors in Business Debt Settlement

Certain factors can influence the viability and success of business debt settlement. Key elements to consider include:

Type of Debt

The type of debt impacts whether creditors may agree to settle. Unsecured debts like credit cards, accounts payable, and business lines of credit are more likely prospects. Settling secured debts like mortgages, equipment loans, and car loans can be more difficult.

Age of Delinquency

Many creditors will not consider settlement until debts are at least 90-180 days past due. The further behind payments are, the more willing creditors may be to settle for a reduced amount.

Credit Score

Businesses with poor credit scores have more leverage to settle debt compared to those with good scores. Creditors see high risk of nonpayment for businesses with low scores.


Creditors have less incentive to settle if debts are secured by business assets like property or equipment they can seize. Settlements may require giving up collateral.


The business must have cash available from savings, loans, or investors to fund lump sum settlements. Without financing, the deals cannot go through.

Considering these factors allows an informed decision about pursuing settlement in a particular situation.

Business Debt Settlement Process

Settling business debt requires carefully navigating a multi-step process. Key phases include:


Determine eligibility for settlement by reviewing debt types, creditor policies, account status, and potential settlement percentages. Unsecured consumer debt like credit cards tend to be the most viable.


Gather details on all debts including creditors, account numbers, balances, interest rates, fees, and minimum payments. This provides the documentation needed to negotiate settlements.


Stop making monthly payments so debts fall further behind. Typically, creditors will not consider settlement until accounts are 90 days or more past due.


Work directly with creditors or use a settlement firm to negotiate reduced lump sum payoffs. Settlement amounts may range from 25% to 80% of the total owed depending on negotiation leverage.


Creditors accept settlement offers by signing legally binding agreements to accept lump sum payments as payment in full and forgive remaining balances.


Obtain financing through business savings, loans, investors, or lenders to fund the settlement amounts according to the negotiated terms.


Pay the settlement amounts to the creditors by the agreed upon deadlines, typically within 30-90 days of reaching settlements.


Upon receiving the settlement payments, creditors forgive the remaining unpaid debt balances as legally obligated by the settlement agreements.

Navigating these phases takes strategic negotiation and financing to succeed. Hiring professional help can guide the process.

Should You Hire a Business Debt Settlement Company?

Business owners can negotiate debt settlements directly with creditors, but many hire settlement companies for assistance. Some key considerations when deciding whether to engage professional help include:

Settlement Knowledge

Experienced settlement firms know how to negotiate effectively with different types of creditors. They have established strategies to secure optimal settlements.

Creditor Relationships

Settlement companies cultivate long-term relationships with creditors. These connections can facilitate better settlements than a business owner may obtain directly.


The settlement process involves extensive documentation and negotiation. Hiring professionals saves the business time and focus on core operations.


Emotions can run high when negotiating debt relief. Third-party companies remain detached and rational to secure the best deals.

The right settlement firm can navigate the complex process and achieve favorable outcomes for the business. However, business owners should research companies thoroughly before engaging services.

How to Choose a Reputable Business Debt Settlement Company

With myriad settlement firms touting their services, it is essential for business owners to know how to select a reputable provider. Important criteria to evaluate include:

Experience and Track Record

Look for an established company with years of experience and proven debt settlement results. Ask for client testimonials and data on their settlement percentages.

Industry Reputation

Research a provider’s reputation with organizations like the Better Business Bureau. Favorable ratings and lack of complaints indicate trustworthiness.

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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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