Company debt is a hot factor that nobody wants to be part of. Thanks to the worldwide pandemic and the ongoing economic recession, many companies are unable to pay their bills. It would be awesome if you could carry out some kind of insurance scheme to help you cover bills in times of crisis. That doesn’t exist, sadly.
So, if you’re in debt, what should you do?
Your debt handling and legal responsibility choices can differ based on the type of business you have. A sole proprietor is directly accountable for all company debts.
Partners also have personal responsibilities in such collaborations. This ensures that creditors will come after your personal assets to pay off your company debt. On the other hand, whether the enterprise is structured as a partnership or a limited liability company, the investors and shareholders are exempted from personal liability.
Any tax liabilities will be passed on to owners if the company closes. Creditors can also threaten to “break through the corporate curtain” and demand payment from customers if you pay personal expenses from company funds.
Paying or reducing your mortgage
We know it’s better said than done, but there are a lot of ways for servicing the debt. It is possible to negotiate discounts, merge loans, crowdfunding and arrange payment schedules.
We also advise customers to make sure that they get all the money they owe before taking out new loans. If your customers or clients owe you money, consider turning to a collection agency like The Baker Group for advice about how to fix the issue.
Declare Bankruptcy
If you cannot discuss debt settlement with your creditors on amicable terms, Chapter 11 bankruptcy is an alternative.
Companies must have some operating capital before suing in order to survive the bankruptcy proceedings through which the judge decides how many creditors will get.
However, a 2005 report showed that nearly 40% of Chapter 11 bankruptcies had transferred to Chapter 7 where the business had closed and the properties had been sold with proceeds to the creditors.
Speak to a professional at The Baker Group to consider the probable result before you file bankruptcy.
