When you have to close your business due to unfavorable conditions it is obvious that there would be a debt pool of considerable size and to different creditors. Right from the landlord to the suppliers, the utilities and service providers or even a bank or a private lender, everybody would be calling you to get their due amounts. When you notify your creditors about your decision for closure which would obviously limit your liabilities, you would also want to consider on some other facts regarding paying them off. You may ether pay them their full amount, if cash permits, or make settlements for less payments and lastly, filing for bankruptcy.
Settle For Little
Whatever you want to do, negotiating is the key in such situations and negotiations should be with an objective to settle for as little payments as you can so that you are left with some cash for any future settlements, assuming that you can never meet all your creditors demands in full. Now the question is how little you can offer to a creditor would depend on the type and attitude of the creditor and the legalities of the debt itself. When you have personally taken a debt or even worse when a relative or friend has cosigned for it, the creditor knows that you are liable to pay the debt and would have that extra leverage.
Legal Status Of Debt
On the other hand if your company is a corporation or an LLC and has no debts guaranteed personally, then the creditor would agree to accept lower payment than you owe as a complete and final payment knowing the fact that you are not liable to pay out the debt personally. But it is better to pay off around seventy percent of your debt irrespective of the legal status of the debt that you currently have. You would find that many creditors would even agree to accept even half of the amount due knowing that once you are out of business and gone, they would lose on their entire amount outstanding to you.
Hire A Lawyer
Hiring a lawyer for the purpose of negotiation is a wise decision to take as they can deal with the negotiation part aggressively and also find ways when a few creditors dispute the low amounts offered for settlement. You have to consider all your creditors and not pay one or two small creditors and ignore the larger ones. Therefore, a lawyer may help you out from this sticky situation and also suggest you to use the last straw when all negotiations fail and file for bankruptcy. To know more about the pros and cons of bankruptcy, click here to take an educated decision.
Prioritize Your Debts
Prioritizing your debts according to the rate of interest charged by your creditors and the amount outstanding is very necessary to come out of debt. Pay those debts to which any asset is collateral and then pay the wages to your employees along with their benefits, and then loan with court judgments and for which you are liable personally. With the remaining amount you can distribute it to all other creditors.