Negotiating and Settling business debts.
My once large, successful and thriving business failed more than a year ago. I already have 3 large judgments from personal guarantees entered against me. ... from a large public corporation property landlord, from a local bank for a commercial building foreclosure deficiency balance, and from a large bank for biz credit line non-payment. I will have one more judgment, most likely, for another commercial building foreclosure deficiency when the bank gets around to selling the building. ( the bank walked away from a potential short sale years ago and it is sitting). These judgment debts could be a million $$$ with interest accumulating. ...without interest...perhaps over $800k. No small amount -:(
I do have some equity in my home and do not want to lose my home through forced sale...the equity also prevents me from going bankrupt. And as I continue to pay my home mortgage, the equity grows. I still have 3 mortgages on my home. One of the above creditor judgments also hold my 2nd mortgage, due to mature in 3 years. The 1st mortgage on my home will mature in 7 years. I am getting old; I want to protect what I have left ( my house, a 13 year old car, my bank account). I have been able to achieve new income and continue to pay my home mortgage. Never missed a payment on my house or a credit card.
Can I unwind this and bounce back from all the business debts?
Are all of the judgments in place against you personally, or are some of them against a now defunct business? Do you structure your affairs then and now through an LLC? The answer to these questions would impact my general feedback that follows:
With an estimated 7 figure in judgment debt, and 15ok available to negotiate settlements, you would need to achieve 15% agreements with all parties. That, in my experience, is not probable. Possible? Yes. It would depend on many things. The ability to document hardships that do not appear to exist for you are why I say not probable.
You are earning again. What amount of money can you set aside from earnings to deal with the debts?
From the way I read the background you gave, you appear to have spoken with a bankruptcy attorney. Is that correct? If you have not, I would encourage you to speak with a couple of them. Not just any bankruptcy attorney either. You should look to connect with one who handles personal and business bankruptcies. Finding one with accounting background, or with accountants on staff would probably prove beneficial. Why? There may be tax implications in your situation. There may even be losses attributable with a backward looking focus on business and personal returns.
What is the nearest city to you?
Structure your affairs to limit exposure to a failed or bankrupt business.
If you are now a wage earner, sophisticated methods are not going to be useful. If any of the judgments result in liens filed against your personal residence that has equity in it, also not productive.
Living the next 20 years with a million dollar cloud over your head will not be simple.
How much are you earning? Is it over the threshold for you to qualify for chapter 7 bankruptcy in your state with the amount of people in your household?If you can meet the chapter 7 income threshold, and have good earning potential, perhaps giving up the 150k war chest you have now, giving up the home and starting fresh would be the best option. If you are forced into a chapter 13 on personal debts, the court will be your “financial nanny” for the next 5 years. Even that may be a good path compared to some of the alternatives.
Is the 150k part of any retirement account, or is it liquid?
Please answer my questions in the comment section below and lets take it from there.
Readers with questions or concerns about settling business debts are welcome to post below and receive feedback.