- The pros and cons of settling business debts
- Common types of business debts we help settle
- The business debt settlement process and timeline
- Laws and regulations governing business debt settlement in Illinois
- Alternatives like merchant cash advances
- FAQs about working with a business debt settlement lawyer
We know that dealing with overwhelming business debts can be scary and stressful. Our goal is to educate you on your options so you can make an informed decision about the best path forward for your company.
The Pros and Cons of Settling Business Debts
Debt settlement involves negotiating directly with creditors and collectors to settle accounts for less than the full balance owed. It can be an effective way for business owners to resolve unmanageable debts while avoiding bankruptcy.
Potential Pros
- Settle debts for a fraction of what you owe
- Avoid bankruptcy and preserve your business credit
- Stop accruing interest and fees
- Consolidate multiple debts into one monthly payment
- Free up cash flow to reinvest in your business
Potential Cons
- Settling debts may impact your personal credit score
- Not all creditors will agree to settle
- Debt relief programs take time to complete – usually 24-48 months
- You may owe taxes on the amount of debt forgiven
As you weigh the pros and cons, an attorney experienced in debt settlement can advise you based on your specific situation. The right program can be an affordable lifeline that helps struggling business owners regain their financial footing.
Common Business Debts We Can Help You Settle
Some of the most common types of business debt we help Illinois companies settle include:
Business Loans and Lines of Credit
Loans from banks, online lenders, or alternative financing sources often come with high interest rates and stiff penalties for late payments. If your business has fallen behind, settling these debts for less than you owe can provide relief.
Business Credit Cards
Rewards cards and other credit lines can quickly snowball out of control. We negotiate with major issuers like American Express, Chase, Citi, and Capital One to settle balances at a discount.
Accounts Payable
Unpaid bills from vendors and suppliers can put a strain on cash flow. We work with your creditors to settle older invoices for pennies on the dollar.
Payroll Tax Debt
If you’ve fallen behind on payroll taxes like Social Security, Medicare, and unemployment insurance, the IRS and state taxing authorities have aggressive collection powers. Settling this type of tax debt can remove the threat of levies, asset seizures, and other enforcement actions.
Commercial Leases
Getting out of an unaffordable office or retail space lease can be difficult if your business has changed or declined. We negotiate lease buyouts and rent reduction agreements with commercial landlords on your behalf.
Business Judgments/Lawsuits
Facing a judgment against your business can seem hopeless – but even court-ordered debts can often be settled out of court. This may involve negotiating payment plans, structured settlements, or discounts on the judgment balance.The key is acting quickly once debts become unmanageable. The further behind you fall, the harder it becomes to negotiate settlements with creditors.
How Does Business Debt Settlement Work?
If you decide debt settlement is the right choice for your Illinois business, here is an overview of what you can expect:
- Free Consultation – Speak with one of our business debt relief experts for a free case review. We’ll discuss your unique situation and which debts make sense to target for settlement.
- Retainer Agreement – If we believe we can help settle your business debts at a substantial discount, we will provide a retainer agreement outlining our fees. Attorney fees are only earned as debts are successfully reduced or resolved.
- Open Dedicated Escrow Account – You will open a dedicated escrow account that our firm controls. Each month you deposit funds which will eventually go towards negotiated debt settlements.
- Stop Communicating with Creditors – We take over all negotiations with your creditors. Further communication could hurt settlement negotiations. We handle everything.
- Negotiation & Settlements – Over the next 24-48 months, our lawyers work aggressively to negotiate debt reductions with your creditors. Funds are disbursed from escrow as settlements are reached.
- Changed Payment Terms – As debts are settled, creditors amend payment terms to reflect reduced balances. Remaining accounts may be converted into affordable monthly payment plans.
- End of Program – After 3-4 years, all targeted business debts will be resolved through settlements or payment plans you can manage. We continue representing you until all accounts are closed.
The exact timeline depends on the total debt enrolled and your monthly contribution. But in most cases, our debt relief programs can help business owners finally see light at the end of the tunnel within a few years at most.
Business Debt Settlement Laws & Regulations in Illinois
In 2015, Illinois enacted the Debt Settlement Consumer Protection Act which established consumer protections around debt settlement services within the state. A few key aspects of the law include:
- Licensing – Companies and individuals providing debt settlement services for Illinois consumers or businesses must be licensed through the Illinois Department of Financial and Professional Regulation (IDFPR). Our law firm maintains active licensing.
- Fees – Total fees charged for debt settlement services cannot exceed 15% of the overall debt amount, when also including any payments made into a dedicated account. Attorney exceptions may apply.
- Dedicated Accounts – Client funds must be held in a dedicated bank account for the purpose of distributing settlements to creditors.
- Disclosures – Extensive upfront and periodic disclosures around services, results, and client rights must be provided throughout the term of the debt relief program.
It’s important for Illinois business owners to understand their rights under state law before entering into any debt reduction or settlement program. Our team stays up to date on all regulations affecting business debt settlement in order to maintain full compliance.
Merchant Cash Advance Alternative
Another option some business owners consider when facing cash flow issues is a merchant cash advance (MCA). This alternative form of financing provides a lump sum advance in exchange for a percentage of future credit card and debit card sales.Merchant cash advances can provide quick access to capital when traditional loans aren’t an option. But the costs often add up to equivalent annualized rates over 100% – making them one of the most expensive financing options available.Unlike a loan, MCAs don’t have a fixed monthly payment. The amount deducted daily or weekly varies based on your credit card processing volume. Payback amounts can vary widely depending on your sales, often 2-3 times the original advance amount – or more.While merchant cash advances have their time and place, they should be viewed as a short term bridge to cover temporary cash needs – not a long term solution. The daily/weekly deductions can become yet another overwhelming debt burden on struggling businesses.
