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When the first debt collection letters land at your door, it can feel as if your whole world is about to come crashing down. You’ve invested your heart and soul into your business, not to mention a hell of a lot of money, and creditors are chasing you for late payments. It doesn’t seem fair, especially as they take their time to pay when they have overdue balances.
First, don’t panic. Panicking leads to stress, and high cortisol levels encourage you to do silly things that make no sense. You’d be surprised at how many entrepreneurs bury their heads in the sand and hope the debt will go away by itself.
By breathing and allowing yourself some time to get to grips with the situation, you’ll find that your mind is clearer and capable and making informed decisions. All you need now are the tips on how to negotiate firmly and fairly and guidance that will stop creditors from pressuring you regularly.
There isn’t a one-size-fits-all policy because every business is different, and some can be more aggressive or understanding than others. Still, the following steps seem to be successful, so it’s well worth giving them a try.
Set Up Your Business Correctly
If you’re based at home and don’t have office space, you can fall into the trap of treating the company as inferior to the competition. Okay, you don’t have the contacts or sales that your rivals have, yet every organization must start somewhere. With that in mind, it’s essential to act as you mean to go on.
What does this mean? It means that you shouldn’t automatically choose the option or sole trader when you file for a business license. Unfortunately, lots of entrepreneurs don’t know that this provides zero protection regarding your corporate and personal assets. In short, debt collectors can legally take your household items to recover the arrears. Be very careful and informed regarding how you legally setup your business.
Sole traders have it tough because creditors know this and use it as leverage to recoup their investment. As a result, you need to think carefully from the outset of your journey. Yes, incorporating a business is more challenging as there are more options; however, the protection is greater. Check with your local, state, and country government to learn about what type of business you need to sign up with the government.
Certain types of legal business setups means creditors can only collect business assets, which stops them from showing up on your doorstep unannounced. Most budding businessmen and women assume this situation won’t happen at the launch of their startup for obvious reasons, but it’s well worth considering as it will save you hassle in the long-term.
Legally, creditors and collecting operating on their behalf aren’t allowed to harass or intimidate you in any way. Sadly, there are lots of cases of individuals and companies overstepping the line in a bid to get their resources back. It’s not a nice experience, and nobody should have to go through it, whether you legitimately owe the money or not.
However, debtors and agencies’ actions can be a blessing in disguise since you can file an application in court to stop them from harassing you. This includes, but isn’t limited to, not contacting you on social media, using more than one debt collector, telephoning you repeatedly within a 24-hour period, and any threatening behavior.
Of course, the burden of proof is on you, which is why it’s wise to retain any correspondence between you and the relevant parties. Emails are easy as they are already written down, but you might want to start recording phone conversations and taking screen grabs of social media posts. By doing this, you can build a good case against the creditor to rein in their actions.
Another thing to look out for is whether they told you before the debt was passed on to an agency. You can do this by sifting through threads and checking the dates against their claims.
Speak To Them Directly
When third-parties are involved, it’s almost impossible to have a clear and open conversation about your situation. What happens is that the waters become muddy, and neither party recognizes that there could be a compromise. To this effect, never talk about potential middle ground through other people.
A debt collection agency isn’t going to pass on your message because A) it’s not their job, and B) they don’t work for the creditor. With this in mind, you should attempt to speak to the people with power directly when you have a solution. A quick fix might be something as basic as a payment plan.
But, plans can fail from the outset if your creditor isn’t aware that you’re willing to commit to favorable terms and conditions for each party. Also, don’t be put off by their bluster. Should your creditor tell you that a payment scheme isn’t an option, then they are lying.
Mostly, they are happy to outline a plan that involves breaking the debt into manageable increments. After all, it’s better for them to receive some of the money rather than aiming for the moon and missing.
Threaten To Sue
A lawsuit is something you nor your creditor wants. It’s the last resort that’s expensive and time-consuming, and generally mentally tiring. However, it is a nuclear option if you feel as if your words are falling on deaf eyes. After all, even big companies don’t like going to court and dragging their name through the mud.
Plus, you might have a good case and win, especially if you can prove they acted negligently. In this case, your lawyer’s fees will be paid and you’ll receive compensation. Depending on the figure, it could be enough to wipe the slate clean and start again. Still, suing isn’t a topic you should expect to pay off.
Instead, you need to show that you are willing to take decisive action and not be bullied. Creditors know as well as you that a lawsuit is as unagreeable for you as it is for them. Still, they can’t take the chance that you’ll go all the way and end up winning. Not only is the court system unpredictable, but even if they win, the victory might bite them in terms of negative PR.
Be sure to speak with a lawyer before ever even thinking of doing this. All it takes is a professional letter with a legal header to make them see that you’re not messing around and that they should treat you with more respect.
File For Bankruptcy
Write down the worst-case scenario of launching and running your own business. Is it filing for bankruptcy? Most entrepreneurs hate the idea of having to apply for a fresh start as it’s an admission of failure. It can be dishonorable to have to file bankruptcy instead of give back what has been given by creditors in good faith. But this can be the absolute last resort when there are no other options. Seek guidance from an attorney.
For one thing, bankruptcy attorneys are experts who know what you can pay and what you can forfeit. For instance, most unsecured loans are cleared when a firm goes bankrupt, meaning that creditors can’t continue to pursue the debt. Without legal help and knowledge on your side, you can fall foul of this fact.
Secondly, a bankruptcy application isn’t as destructive as you imagine. Yes, it affects your credit, but you can build it up again with the right financial maneuvers. Sure, it makes it tough to start another business, yet you can go into partnership and share the load. There are more advantages than people care to admit, especially with the stigma surrounding the topic.
However, when one of them is that it prevents creditors from contacting you to chase up overdue balances, it has to be considered if your circumstances are in the balance.
Consolidate Your Debts
The problem with having multiple debts is that you’ll also have several creditors. So, the intensity can be greater when different agencies are contacting you to talk about your situation. Plus, there’s the fact that dealing with many arrears is harder from an organizational perspective. You can do just as much damage by juggling them and missing payments.
As the name suggests, consolidation loans make the process simpler and less stressful. By rolling your business’s debts into one, big balance, you don’t have to fret about missing deadlines or incessant calls. By keeping up with repayment T’s and C’s, your life will be much easier.
Okay, it’s a way of passing the buck since you swap one creditor for another. And owing the bank isn’t anyone’s idea of fun! Still, the lump sum will clear the clutter in the company’s account and your mind. Plus, you might be able to negotiate a smaller percentage rate. Also, as long as you can keep up with the monthly amounts, it’s smarter than constantly looking behind you to see who is in your rearview mirror.
There are risks, so you should do your research before signing on the dotted line, for example, by ensuring the NFCC or FCAA accredits them. Yet, like bankruptcy, you shouldn’t dismiss it out of hand without considering the pros and cons.
You have to understand your rights when dealing with creditors, or else you might make an even bigger mistake when paying back your debt. Thankfully, legal experts are on hand to help, and recording any correspondence is a savvy move in case the mood changes.
If you are feeling down or depressed for more days than not, please seek medical attention. If you are feeling like you cannot go on, please call the suicide hotline at 1-800-273-8255 or chat here>>> https://suicidepreventionlifeline.org/chat/ Or visit the suicide prevention lifeline at https://suicidepreventionlifeline.org/