Corporate debt relief can be a highly effective way to get a handle on high-interest unmanageable business debt. If your hardship is moderate to severe, a corporate relief program may be right for you. Before you get started, it’s good to note that corporate debt relief comes in many forms. We will give a brief overview of each below.
The Different Forms of Corporate Debt Relief
Bankruptcy, restructuring and settlement are the three avenues that can bring relief to someone struggling to pay their business debt. Restructuring is the safest of the three options and can be very beneficial even to severely struggling business owners. The second least risky is bankruptcy because it’s almost guaranteed to help if you qualify. Settlement is the most risky because the outcome is not known for quite some time after enrollment. However, if your hardship is severe enough, the odds are much more in your favor through settlement.
Corporate Bankruptcy
- Chapter 11
Corporations that believe they can stay in business by reorganizing how they deal with creditors would file for Chapter 11. This is known as a business reorganization bankruptcy. This type of bankruptcy can also be used by sole proprietors who have qualifying income.
- Chapter 7
Chapter 7 bankruptcy involves the liquidation of a business’s assets to resolve financial strains. This is used by businesses who have little, to no, chance of keeping their doors open. Qualifying for this type of bankruptcy consists of taking a means test. This will determine, based on income, if you are eligible.
Unlike the next two corporate debt relief options, both bankruptcy options can include secured debts.
See more about corporate bankruptcy by visiting Investopedia’s page “Corporate Bankruptcy: An Overview“.
Corporate Debt Settlement
This types of program addresses hardships related to unsecured business loans or credit. Corporate debt settlement is typically used by businesses who are trying to remain in business.
During the approval process your debt to revenue ratio will be examined. This will determine eligibility as well as the likelihood of being able to successfully settle your debts.
Beware when looking into this route, some settlement companies will gladly enroll your debt even if your hardship isn’t justifiable to enroll in such a program.
Corporate Debt Restructuring
This is the safest of all options in resolving unmanageable business debt. This option allows you to get new, restructured terms in place with your unsecured lenders. It’s not uncommon to get as much as a 50% reduction on your payment. This allows your business to cash flow much better and avoid stacking more loans.
The type of debts that can be enrolled in this type of program are business advances such as MCA loans, vendor debt and some alternative lines of business credit.
This approach is the most safe because restructured terms are agreed to at the beginning of the program. It also requires less of a hardship status than bankruptcy or settlement. And, unlike settlement, the lenders will get the full outstanding amount owed.
Corporate Debt Relief Overview
No matter how much your business is struggling financially, there is a relief option that’s right for you. The worst thing that you can do when in, or facing, a hardship is to not take any action at all.
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