Business Debt Settlement FAQs Answered

February 24, 202415 min read


Business Debt Settlement FAQs Answered

Running a small business comes with many financial challenges. As a business owner, you may have found yourself facing mounting business debt that feels overwhelming. If you’re struggling with business debt, know that you have options – and that the financial experts at Delancey Street are here to help.In this article, we’ll walk through some of the most common questions small business owners have about business debt settlement. Our goal is to provide you with clear, concise answers to help you make informed decisions.

What is business debt settlement?

Business debt settlement is the process of negotiating with your creditors to pay off your business debts for less than the full balance owed. Specialized debt settlement companies like Delancey Street work on your behalf to secure settlements for a fraction of what you owe.The key benefit is that settlements release you from the full debt owed, providing financial relief. Instead of paying back 100% of what you owe over time, you pay a smaller negotiated amount as a one-time lump sum payment to settle accounts.

How does business debt settlement work?

The debt settlement process involves:

  • Stopping payments to creditors: To build negotiation leverage, you’ll temporarily stop making payments on the accounts you want to settle.
  • Open negotiation: Delancey Street initiates talks with your creditors, highlighting factors like financial hardship to negotiate a discounted lump sum settlement.
  • Secure settlement offers: As we secure settlement offers from your creditors, we present them to you so you can decide whether to accept.
  • Make lump sum payment: Once you accept an offer, you’ll make a single lump sum payment to the creditor to settle & close that account.
  • Repeat process: We’ll repeat this process across all your eligible debt accounts until each one reaches settlement.
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Can all business debts be settled?

Many types of business debt can be settled, but not all. Debt settlement typically works for unsecured debt obligations like:

  • Business credit cards
  • Business lines of credit
  • Past-due supplier & vendor invoices
  • Commercial leases
  • Business equipment financing loans
  • Business vehicle financing loans

Other types of secured or government debts are not usually eligible for direct settlement. That includes payroll taxes, student loans, mortgages, auto loans, and recent debts unlikely to settle.

What are the benefits of business debt settlement?

Settling your business debts for less than you owe provides major financial benefits:

  • Pay off debt faster: Settlements let you resolve debt in 24-48 months rather than paying for years.
  • Save money: You can settle debt for pennies on the dollar, saving significant money.
  • Avoid bankruptcy: Settlements let you avoid business bankruptcy and the harm it causes.
  • Tax benefits: The cancelled debt from settlements may be tax deductible.
  • Prevent legal action: Settlements help avoid lawsuits from creditors over unpaid debts.

Can I do business debt settlement on my own?

Attempting DIY debt settlement is extremely difficult and risky. Creditors often refuse to negotiate with business owners directly and are more likely to sue.Specialized debt settlement firms have extensive experience negotiating with creditors. Delancey Street’s dedicated experts know what settlement offers are realistic for different debts based on our 85% success rate. We do all the heavy lifting to get you results.

How much does business debt settlement cost?

Delancey Street’s fees are based on the total debt enrolled and settlements achieved, not on how long it takes. This aligns our incentives around getting you results quickly.Expect fees around 20-25% of the total debt settled. The more we save you, the more we earn. There are no upfront fees – we only collect fees proportional to settlements secured.

Can I settle debt on my own while working with you?

No. For debt settlement to work, Delancey Street needs to act as your exclusive representative. We ask clients to sign an agreement stating they will no longer contact creditors directly.This is necessary so you do not accidentally say something that weakens our negotiation leverage with your creditors. We need full control to secure the deepest discounts possible.

How long does business debt settlement take?

With our expertise, the debt settlement process typically takes around 24-48 months from start to finish.The timeline can vary based on your unique mix of debts, the settlement offers secured, and how quickly you can fund lump-sum settlement payments.We always seek to settle your debts in the shortest time frame possible while maximizing savings.

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Can I get a business loan while settling debt?

Yes, you can qualify for financing even during active debt settlement.As a leading lender in the merchant cash advance industry, Delancey Street offers small business funding and working capital loans to clients undergoing debt settlement.We understand your funding needs and can provide financing with flexible approval terms. Our business loans serve as an extra tool to help your company succeed.

What happens if I can’t make a settlement payment?

We understand unexpected situations may affect your ability to make a payment. If you anticipate any issues, let us know immediately so we can discuss options.As your advocate, we’ll work with you to overcome obstacles. In some cases, we may be able to negotiate a new settlement date if the creditor permits it.

Can debt settlement hurt my business credit score?

Yes, debt settlement can negatively impact your personal credit and business credit scores since it involves stopping payments and settling for less than you owe.However, credit damage already exists from falling behind on unaffordable debts. Settling can actually help you start rebuilding credit sooner than continuing expensive monthly payments.As you resolve debts through settlement, your credit utilization also improves. And the tax savings from settled debt being potentially tax deductible can boost your business finances.

How is debt settlement different than debt consolidation?

Debt consolidation combines multiple debts into a single new loan, spreading repayment over 1 monthly payment. The goal is making debt more manageable through lower monthly bills.Debt settlement saves you money by negotiating discounts on what you actually owe. This provides greater financial relief compared to debt consolidation that still requires repaying 100% of debt.

Can I settle debt without hurting my credit score?

Unfortunately, no. Since debt settlement involves stopping payments and settling for less, it will negatively impact your credit reports and scores.However, debt settlement helps you resolve debts far faster than continuing expensive monthly payments you cannot afford. This lets you begin rebuilding credit sooner.

Do I need to be behind on payments to settle debt?

Yes. For creditors to be motivated to negotiate debt settlements, you generally need to fall at least 90 days behind on payments.As part of the process, Delancey Street will help you strategically prioritize which accounts to fall behind on first while protecting assets like your home or car.

Can Delancey Street stop creditor calls & lawsuits?

Yes! We offer powerful protections once you sign up for debt settlement services with us. Delancey Street sends custom cease and desist letters to your creditors informing them they can no longer contact you directly – only through us.We also leverage the Fair Debt Collection Practices Act reminding creditors they cannot sue, threaten you, or continue attempts to collect on debts we are actively working to settle. This provides immediate relief from creditor harassment.

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What debts should I settle first?

Delancey Street will strategically build a customized settlement roadmap for your unique mix of debts based on:

  • Balance size: Higher debts typically save you more money when settled.
  • Interest rates: Eliminating high-rate debts stops accruals.
  • Collateral: Settling secured debts can help retain assets.
  • Statute of limitations: Settling debts nearing SOL expiry stops legal liability.

Based on these factors, we identify and target the optimal sequence for resolving your debts efficiently.

Can I settle debt on my own first, then hire you?

No. Delancey Street needs to analyze your full debt portfolio to determine the optimal settlements strategy. If you independently settle some debts first, it interferes with our process and limits how much we can save you.For the greatest success, enroll all eligible outstanding debt with us upfront so we see the full picture and maximize savings across your entire debt load.

What are the tax implications of debt settlement?

When a creditor agrees to settle a debt, a portion of the cancelled debt may qualify as taxable income unless you are insolvent.However, the IRS allows taxpayers meeting certain criteria to exclude cancelled debt from taxable income, such as if settling the debt would have caused insolvency.Delancey Street partners with tax experts to help clients navigate any potential tax implications from debt settlement, including taking advantage of possible deductions and exclusions.

Do I need to have a business to qualify?

Yes. Delancey Street focuses specifically on helping small business owners and entrepreneurs settle their company debt accounts.If you only have personal consumer debts in your own name, unfortunately our business debt settlement services won’t apply to you. Please check out alternatives like consumer debt settlement or debt management instead.

What debts are best for debt settlement?

As noted earlier, unsecured debts like credit cards, lines of credit, past-due invoices, commercial leases, and old business equipment/vehicle loans tend to be ideal for settlement since no assets are tied to the debts.Settling newer debts is typically more difficult since creditors prefer waiting to see if accounts become delinquent before accepting discounts. Very recent debts often must age first before qualifying for settlement.

Can I settle federal or state tax debt?

No. Federal and state tax authorities have specific programs for negotiating tax debt settlements, like Offer in Compromise agreements and Installment Agreements.Delancey Street focuses specifically on private commercial debts owed to credit card companies, banks, financing companies, suppliers/vendors, etc. We do not handle tax debt settlement negotiations.

What should I do once all my debt is settled?

Congratulations on becoming debt-free! Now focus on building savings, sticking to a workable budget that aligns with your post-settlement financial situation, and take steps to begin rebuilding your personal and business credit.Delancey Street also provides small business loans and working capital financing to help entrepreneurs get back on stable footing, fund growth initiatives, and secure your company’s future success.

Let Delancey Street Help With Your Business Debt Settlement

If you have additional questions about the business debt settlement process or want to discuss your unique situation, please contact Delancey Street today to speak with one of our dedicated debt experts for free. Call 212-210-1851 or request a callback.Our team knows this can be an overwhelming process. We’re here to offer guidance, support, and our expertise negotiating on your behalf to resolve your business debts as quickly and affordably as possible. With an 85% settlement success rate, we have the experience to help you break free of debt and get back to business growth.

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