The Differences in Debt Help for Businesses and Individuals
Having too much can put a damper on your finances. This is true if you are dealing with personal debt or business debt. However, there are some key differences between business debt and personal debt. The process of obtaining debt relief is different depending on what type of debt you have.
Individuals Can Settle Their Debts Without Bankruptcy
Personal debt can be resolved in many different ways.
Debtors can contact their creditors in an effort to have their debts settled.
Debt settlement can reduce a debt by 50 percent or more.
This can provide a huge savings for anyone struggling to pay down a large credit card debt.
Credit counseling is also available for individuals dealing with large unsecured debts. Many debt relief plans are available for those who need help with their finances. Lower interest rates and reduced late fees can be negotiated in many cases.
Individuals who go into bankruptcy to liquidate their assets file for Chapter 7 bankruptcy. Personal debt that is being restructured is filed under Chapter 13. This gives people the ability to discharge their debts and get a fresh financial start.
Businesses Tend to Restructure Their Debts
Corporations that file for bankruptcy don’t stop operating. They file for Chapter 11 bankruptcy. Chapter 11 bankruptcy is a way for businesses to restructure their debt.
Creditors will work with the company to come up with a new payment plan. Some creditors will take less than what they are owed to help a business obtain debt relief.
The personal credit score of the owner is generally not impacted when a corporation files for bankruptcy. All company assets and liabilities are separate from those of the owner. This protection is why many businesses decide to incorporate in some fashion.
Settling Business Debts You Are Personally Liable For
Some business owners cannot get a loan without putting their personal credit on the line. Many new businesses lack the track record needed to secure financing any other way. Therefore, a new business owner may take out a credit card or personal loan.
Failure to pay off this loan can harm the owner’s credit. However, unsecured business debts can be settled much like any other personal debt. Obtaining debt relief through a settlement can lower your interest rate while also reducing the balance owed.
It should be noted that secured debts cannot be settled as easily. Most creditors will simply sell off whatever you used as collateral for the loan. This means your house could be liquidated if you cannot fulfill your debt obligation.
Getting relief from debt is a fairly simple process. You either contact your creditors or go to a debt relief service. Your unsecured debts can then be settled for much less than you currently owe. Corporate debt is restructured through a court-appointed trustee in most cases. The process typically takes two to four years depending on how you structure your settlement.
Donald Watson is a blogger who writes about his experiences of getting out of debt.