Bankers Health Group issues loans and credit cards primarily to businesses, though I do see a sprinkling of loans made to consumers as well. The loans tend to be on the high side. I regularly speak with people who have 6 figures of unsecured BHG debt, which stands in contrast to most unsecured personal loans throughout the US being offered at amounts of 50k and lower.
In this article I will outline three different options to resolve your BHG loan when you can no longer keep up with your minimum payments.
Most people I speak to about their BHG loans becoming unmanageable are people who borrowed the funds to help in the operation of small businesses. But to get the loan, they had to provide BHG with a personal guarantee. This means you are contractually obligating yourself to pay the loan back if the business cannot, and even if the business closes.
This is not irregular in the least. Many lenders to small businesses require a personal guarantee just like BHG. In fact, most of the large national banks that issue credit cards to small businesses will require the same personal guarantee from the owner/operator of that business.
Why does this matter? It means your personal finances could be impacted in two major ways (credit reporting and aggressive collection tactics) by the decisions you make regarding your business debts. And while this is 100% true for the majority of lenders out there, it is only half true for BHG! This is because of their credit reporting policies, or lack thereof, which I will explain in more detail below.
BHG debt relief options
When we hit a rough patch in our business efforts it can be temporary in nature, such as a seasonal slowdown that is normal for some. It can also be something outside of your control, and difficult to predict how long it will last. Other scenarios could even force us to weigh liquidation and business closure options.
One of the small businesses we recently worked with lost virtually all local foot traffic due to city road and sidewalk closures that were not expected. At first he thought he would only need a short term payment solution on some of his business debts, but the city took longer to complete repairs.
Regardless of how long the business will feel the monthly cash flow pinch, there are typically 3 main options to think about when you need some form of debt intervention. I define debt intervention as having to do something different than what you have always done, which is pay your loan back on time each month.
These three options typically include:
- Temporary or long-term monthly payment relief from BHG.
- Negotiating a settlement with BHG to pay less than what you owe to resolve the debt for good.
- Discharging the debt by filing a business or personal bankruptcy or even having to do both versions.
Lowering your BHG payments
When enrolling your credit cards in hardship plans with many brick-and-mortar banks out there, whether business or personal, you can often do so without a bunch of (or perhaps any) hard documentation of your business and personal finances. With BHG this is typically the opposite.
Heavy documentation such as P&L’s, bank statements, financial worksheets, etc., is not necessarily a problem, but this type of request should not be taken lightly, and it should be done correctly to increase the likelihood of success.
The real problem with lower monthly payment options with BHG is not the documentation, it is that you are putting yourself and your business in a negative amortization situation. If your monthly payment to BHG is normally 3500, typically a large portion of that is paying interest and less of that payment is going to principle. If we get your payment cut in half to 1750 per month for the next year or more, you are likely not paying enough to service the interest, which means your loan balance is going up instead of down, even with the payments you are making!
Each of us has a different set of financial circumstances. Monthly cash flow is one thing, but that financial documentation that is needed with BHG can make each outcome different.
Lowering your monthly payment to BHG can still make sense, just like it did for the business I mentioned above who lost his foot traffic for several months. Once I know more about your situation I can help paint a clear picture for you of what the short- and long-term implications are. You can schedule a free consult with me by clicking the talk to Michael box below, or the Get Help tab at the top of this page.
Settling BHG loans for less.
BHG loans can be settled for less than the balance owed. The process is a great deal more involved than I cover when negotiating with many other creditors. But one of the consistent and unavoidable factors in settling debts is that you typically must be late with payments. And falling late has some knock-on effects.
Before I get into that, let me point out that settlements we see on BHG loans are often just as dynamic as with other personal lenders, and sometimes with much more time to pay the deals we negotiate. That is great, because BHG loan balances are often much higher than other unsecured loans, so the extra payment flexibility on the settlements is how people can avoid bankruptcy.
Now… I mentioned above about how being on the hook with a personal guarantee for business debt will often cause 2 significant issues for your personal finances.
- The risk a creditor sues you for collection.
Your personal guarantee means you could be named personally alongside the business if the lender takes the account to court in order to collect. Even when the business is dissolved, they could simply sue you personally.
Check out my video about how aggressive BHG can be in using the courts to collect here:
If you have already had your BHG account sent to an attorney for collection, or been sued, you still have options. Some of the most dynamic settlements are still worth pursuing even in this situation.
What about the other impact?
- BHG does not appear on your credit reports when you are current or when you are late with payments.
This is a significant benefit to those of us trying to piece our personal lives back together after struggling to keep a business going or having to make the tough decision to close one.
Let me be super clear here.
If you have a business loan or business credit card from most any major lender, and you gave your personal guarantee (most require it), it does not show on your personal credit reports while your payments are current. But if you miss payments on that business account, often just one or two, suddenly it does show on your personal credit as a negative. This can have a cascading negative effect on your personal finances, such as:
- Your personal credit scores may drop precipitously.
- Other creditors you pay on time may see you as a higher risk and lower your credit limits to the balances you currently carry. This is bad enough, but consider that for many this skews your credit utilization and causes even more credit score pain.
- You could look risky enough to some creditors such that they close your account (even if you do not owe them much, or anything at all)!
At the time I am publishing this article, BHG still does not furnish loan payment history to consumer credit bureaus, even when you have not paid them for many months. It is one of the things I like about BHG loans, and why I would recommend them to small businesses in a strong growth phase for capital improvements.
BHG is not alone with this non-personal credit reporting policy even when late with payments. Bank of America and US Bank behave similarly, as do a handful of other small business lenders.
I typically maintain the view that those of us with serious cash flow problems think through our solutions like a math problem, and not a credit problem. But it is certainly helpful for small businesses to be able to focus on the business side of math without the spillover to the personal math and credit reporting, if we can avoid it.
For those of us who cannot avoid it, you may want to consider bankruptcy.
Filing bankruptcy over our personal finances is typically not that complicated for most of us. But business bankruptcies can complicate things. That said, BHG unsecured loans and credit cards can be discharged in the bankruptcy process and would qualify for rescheduled payments in a chapter 11 or 13.
I highly recommend talking with an experienced bankruptcy attorney in your city or county. You will want boots on the ground intel from someone who deals with the bankruptcy trustees in the court where you would file.
Keep in mind that by closing or bankrupting the business the BHG loan was written to, it does not remove your personal liability to pay the loan. That could mean filing both a business and/or personal bankruptcy for some.
We have worked with many business owners and individuals to avoid bankruptcy by reducing their monthly BHG payments or settling the loan for less, while getting enough time to pay to match your cash flow.
It is well worth the time to schedule a phone call with me to review your overall situation and get helpful details on how to create a strategic plan to move forward with your individualized solution.
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