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Business Debt Relief Lawyers: A Helpful Guide for Struggling Business Owners

Starting and running a small business is extremely challenging. Many entrepreneurs take on significant business debt through loans, lines of credit, and credit cards in order to get their companies off the ground. While this can be an effective strategy initially, unforeseen circumstances like economic downturns, lawsuits, or changes in the regulatory environment can leave business owners struggling under the weight of overwhelming commercial debt.If you find yourself in this situation, know that you have options. Working with an experienced business debt relief attorney can help you negotiate settlements with creditors, defend against aggressive collection practices, and explore strategies like debt consolidation or bankruptcy to regain your financial footing. This article provides an overview of commercial debt relief and how a lawyer can help.

What Qualifies as Business Debt?

Business debt refers to debt obligations taken on behalf of the company itself. This typically includes expenses like:

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  • Inventory and supplies
  • Equipment purchases or leases
  • Commercial real estate costs
  • Hiring and payroll
  • Improvements and renovations

Debt used for personal purchases, even if charged to a company card, does not qualify as business debt. However, there can be gray areas, like vehicles used for both professional and personal needs.If you run a sole proprietorship or partnership, you can be held personally liable for company debts, even if the money was used for legitimate business purposes. With corporations and LLCs, liability is normally limited to the company itself, unless you personally guaranteed any debts.

Why Differentiating Personal and Business Debt Matters

It’s crucial to understand where personal liability exists when dealing with debt relief. If a debt is purely commercial, collectors can only pursue company assets. But if you’re personally on the hook, they can go after your personal bank accounts, wages, property, and more.Laws like the Fair Debt Collection Practices Act (FDCPA) only cover consumer debts, so collectors have more leeway to aggressively pursue business borrowers. That’s why it’s so important to have an attorney review your situation and clearly determine where personal exposure exists.

Options for Negotiating Business Debt Relief

If your business is facing unmanageable commercial debt, a lawyer can help you explore these options:

Debt Settlement

With debt settlement, an attorney negotiates directly with your creditors to pay a lump-sum that is less than the amount owed. This can wipe out the remaining balance completely. Creditors often agree to settlements because they prefer getting something over nothing if you ultimately file bankruptcy.Settlements typically deliver 35-60% savings off the original debt. Having a large portion of the reduced payoff amount available upfront will get you the best deals, but structured payments over time are also possible. Debt settlement works best for unsecured debts like credit cards, medical bills, personal loans, and retail cards.

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Debt Consolidation

Debt consolidation involves rolling multiple unsecured debts into a single new loan with one monthly payment. This can simplify repayment and sometimes lower your overall interest costs. Consolidation works best for borrowers with relatively good credit.While you still pay back the full amounts owed, consolidation can provide temporary relief by lowering monthly payments and avoiding delinquent accounts. Many creditors will halt collection efforts during the consolidation process.


For severely distressed small businesses, filing for bankruptcy protection may be the most effective path forward. This provides immediate relief from creditor harassment while halting collections. The court appoints a trustee to oversee liquidating assets to pay creditors.The most common bankruptcy option for small businesses is Chapter 7, which discharges qualifying debts. However, the business must cease operations. Chapter 11 allows reorganizing the company and continuing to operate by developing a court-approved repayment plan. The business owner maintains control as the “debtor in possession”.Bankruptcy carries long-term consequences, like damaged credit and public records, that must be carefully weighed. An attorney can advise if this route is appropriate.

Why Hire a Business Debt Relief Lawyer?

Trying to negotiate business debt relief yourself may seem like a money-saving tactic, but this can be penny wise and pound foolish. An experienced commercial debt relief attorney brings important benefits to the table, including:

  • Expert negotiation skills – Lawyers regularly negotiate settlements with creditors and know how to leverage the law to achieve maximum savings. They can often slash debts by as much as 60-70% or more.
  • Stop harassment and lawsuits – Once a lawyer gets involved, the rules change. Collectors must deal directly with your attorney rather than continuing to harass you. Lawyers also know how to respond to lawsuits effectively.
  • Avoid personal liability – By reviewing your debt, lawyers can identify where your personal exposure exists and work to limit it. This protects your personal assets.
  • Consider all options – From settlement to bankruptcy, a lawyer will explore all potential debt relief solutions and recommend the optimal approach based on your unique situation.
  • Oversight and accountability – Lawyers are regulated professionals who must follow strict ethical rules. This provides you with oversight and accountability.

Beware of Debt Settlement Scams

Unfortunately, the debt relief industry does have its share of scam artists and predatory companies. Warning signs of firms to avoid include:

  • Charging large upfront fees before settling any debts
  • Making unrealistic promises about how much they can slash debts
  • Advising you to stop paying creditors altogether
  • Telling you to open new credit cards or take out loans
  • Lacking transparency about total fees

Stick to reputable law firms when seeking debt relief to ensure you receive competent, ethical representation. Always get fee arrangements in writing. Legitimate lawyers are not permitted to take payment from debt settlement funds.

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The Debt Collection Process and Your Rights

Before considering debt relief solutions, it helps to understand the typical commercial debt collection process and borrower rights:

  • Demand Letter – Collectors begin by sending a formal demand letter claiming you owe the debt and requesting payment. At this stage, you can dispute inaccurate debts.
  • Collection Calls – If you do not pay after the first demand, collectors will start making phone calls requesting payment. Under the FDCPA, these calls must be within reasonable hours and collectors can only call limited times per week.
  • Settlement Offers – Collectors will often make settlement offers at this stage, typically starting around 25% savings. You can attempt to negotiate further savings, but having a lawyer makes this more effective.
  • Lawsuits – If you remain unresponsive, collectors may file a lawsuit to obtain a court judgment against you. This allows them to pursue legal collection methods like wage garnishment.
  • Seizing Assets – Once a judgment is secured, collectors can take actions like freezing bank accounts, garnishing wages, and placing liens on property.

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