Can you settle business loans that are personally guaranteed?
I have a small sub S corporation with sole ownership. The business sells wholesale flower seed to the commercial seed companies mostly in the U.S. After 7 years of funding the business with a number of different credit lines, business credit cards, and credit from suppliers, I am finding I am just continuing to throw money down the rat hole in hopes to keep the business afloat.
The product is NOT recession proof, and sales have continued to decline the past few years. I have managed to over extend my privileges with my supplier and thus have been cut off until I can bring the account down significantly from $75,000.
Unfortunately with out a fresh supply of seed, it has become impossible to dig myself out of the hole. A classic "Catch 22"....I also owed as a secured loan (a 2nd mortgage)/business credit line to Citizens Bank in Oregon $22,000, an unsecured (but personally guaranteed by both my wife and I) business line of credit at $42,000 along with a business Credit Card with a balance $14,000, both from Wells Fargo , and a business Credit Card from Am Ex with a balance $18,000.
The bank debts are both delinquent less than 60 days. I have settled in June with Citizens Bank to protect my house, and have settled with my supplier, with return of inventory that he "still owned", along with equipment, and stuff that he was willing to take. In essence, I have not shut down the business, but rather acting as a "broker" putting buyer and seller together, hopefully being able to make a very small wage to help continue paying the mortgage. I just turned 62, so plan on looking into early SS to help supplement the income. My wife still works, but only brings home a monthly gross $3000, so I am not in a great spot to continue paying the business debts that now total $74,000.
But wait...there is more! I do have in cash, the remaining receivables that total $30,000. Wells Fargo is aware of the cash as it was in the business checking with them. Yesterday, I transferred that money to my a new personal account with a different bank, as I didn't feel Wells needed to know my status, especially when they call 5 times per day, wondering why I am delinquent with that amount of monies in my account with them.....
The question is, how can I fit a square peg ($30,000) into a round hole($74,000) , in hopes to satisfy the debts with an offer to settle with one lump sum? My other joices certainly are personal bankruptcy, but that saddens me, since I have carried a personal creit score 810 for many years.
—Dennis K
You can settle business lines of credit and credit cards in the name of your S Corporation (C corp, LLC, and DBA’s too), even with the personal guarantee. The process of negotiating a reduced balance on a business loan is similar to consumer debt settlement.
There are a few additional concerns, but you have hinted at most of them with the background details you provided.
Keeping Your Business Open After Defaulting on Debts
If you want your corporation to continue operating, even after defaulting on business loans, you should expect the following challenges:
- Vendors and suppliers will likely require cash payments to continue working with you.
- New relationships (depending on the nature of them) could be hindered by any impairment to your D&B listing (if applicable).
- Breaking any leases would likely lead to equipment repossession (not an issue for you based on what you shared above).
From what you have shared, you could keep your business going, and work from home. You already moved your accounts away from Wells Fargo – where you have accounts you would look to settle with. Do not have any vendor concerns (other than resolving any existing ones), when acting as a broker? Could you carry that out as a DBA, or is the S Corporation better designed to meet your purposes?
Settling an Unsecured Business Loan and Credit Cards You Personally Guaranteed
Your available cash suggests you can fit your square peg into the round hole and avoid bankruptcy by negotiating settlements on your business debts. Using low end estimates, based on my experience and today’s trends, you could come in a little under the the 30k you have. High end estimates would mean you could settle the remaining business loan and credit cards for a touch over the money you have available.
Wells Fargo settles business accounts similar to how they settle consumer credit cards and lines of credit (signature loans). They often will treat business loans over a certain dollar amount a bit differently. And you have a loan with Wells Fargo that crosses that typical threshold. On the 42k loan you may find you need to be prepared to provide a good amount of documentation, like P&L, tax return etc. Settlements on loans this size are often only approved by senior managers, but the leg work is still handled by the typical Wells Fargo recovery department. I have seen management quickly approve settlements, and have seen VP review lead to additional documentation and/or request for more explanation on areas that raised a concern.
Wells Fargo settles business loans that meet their criteria at between 35% and 45%. What you shared so far would suggest to me that you would meet Wells Fargo approval for settlement. But you should be prepared with talking points if the recent 30k you had on deposit becomes part of the discussion when you are negotiating with them.
Negotiating and settling the Wells Fargo business credit card would likely go very similar to how they handle settlement on consumer debt. You would be targeting roughly 40% of the balance as settlement. I have seen a few credit card settlements with Wells get sticky at 45% recently (have also seen some a bit lower if the hardship is relayed well).
You cannot really get fully engaged in negotiations until you are closer to the accounts being charged as a loss on Wells Fargo’s books. And there are some things you can be doing to better set the table for your settlements. But this fact – you must be several months late before you can settle your line of credit and business credit cards – should cause further contemplation and comparison to filing bankruptcy. More on this below.
Assume you settle both the business loan and the credit card with Wells Fargo at an even 40% of the balances. You have the roughly 22.5k you will need to knock those down.
Settling with American Express is something of a moving target of late. Amex does not do much negotiation and settlements directly with their account holders (business or personal). They use mostly outside third party collection agencies and attorney debt collectors. What you target as a settlement will often be contingent on who is collecting for AMEX and how long the account has gone without payment. The range of settlements are between 35 and 60 percent (if not being sued). I cannot really say what to target until you know who is collecting. Lets assume you settle the business credit card with American Express at 50%. That additional 9k on top of the amounts required to settle your business debts with Wells Fargo.
Preserving your Credit Score When Settling Lines of Credit and Credit Cards in Your Business Name
Your concern about credit score you have worked so hard to maintain, were you to file personal bankruptcy may be misplaced. You mentioned you are not yet 60 days late in paying the business loan and credit card, and these debts are personally guaranteed. Take a look at you and your wife’s credit reports to see if the American Express business credit card, or either Wells Fargo accounts are showing. If any are, your being at least 30 days late on a payment would likely show by now. That means your credit report and credit score have already gone down. And because you will often need to be 4 and 5 months late in order settle for the most savings (which you need in order to fund settlements with available cash), your credit report would take a continued hit. Will it be a bankruptcy size hit? Probably not, especially if you can settle all of the accounts prior to them being charged off as a loss by the lenders. And certainly not as long of a credit impact as bankruptcy. But I can make an argument for why that may not matter to you depending on your future credit goals.
Having said all of that, you may find these business cards and line of credit are not showing on your personal credit reports. That is actually pretty common. But something strange can happen on the way to the credit reporting agencies because you personally guaranteed the debts.
The accounts in your business name may never appear on your credit reports, even with the personal guarantee. Missing several payments, followed by settling at some of the earliest opportunities, may prevent the accounts to show up in your personal reports. But I have seen many instances where business accounts suddenly begin to appear on personal credit reports once the accounts go without payment long enough to trigger the banks charging off accounts, followed by dumping them into their normal late stage collection pipelines.
Should that matter to you? It depends. I typically recommend people set aside any credit score and credit reporting concerns when comparing debt settlement with chapter 7 bankruptcy (chapter 13 would be a different story). But with your having 30k liquid, the bankruptcy trustee would want to take that money and disperse it to creditors anyway. In affect, the trustee would be settling up with your creditors the same as you could, but now you have the bankruptcy stain to boot.
There are other legitimate concerns and comparisons than credit reporting when considering personal bankruptcy with settling your business debts. Your states exemptions for other personal possessions, home equity, and more. I would recommend you consult with a bankruptcy attorney prior to committing to settling your business loans. If they recommend chapter 13, or chapter 7 raises issues that you need to avoid, settlement will work. Are there other personal credit cards with balances?
You can answer the questions I posed in the comment section below, and ask additional ones. Anyone reading with similar concerns about settling business lines of credit, or credit cards, can post in the comments below for feedback.
If you would like to talk with me, and work through strategies to resolve your business loans and lines of credit, you can schedule a call using the get help tab and the top of the page, or the box below.
About Michael BoveeMichael started CRN in 2004 with a mission to provide people in need with detailed debt and credit help and education. Michael has participated as an expert panelist in federal consumer protection rule making, collaborated on state law changes governing debt consolidation, has worked as an expert witness in court matters related to the debt relief industry. He is available to speak with you about your financial struggle and helps people resolve their debt problems daily.
Thank you for sharing the informative article.
Hi Michael,
I have a business credit card that has been charged off for a couple of years. I don’t remember if I personally guaranteed it. I cannot find any paper work stating that I did. I read through some of the questions on this page where you suggest to call the creditor to find out whether someone (like me) is personally on the hook for the debt in question. I have two questions: (1) Is the creditor obligated to give a truthful answer? (2) I did find some notes where I called my creditor twice before charge off to see what settlement could be possible. On both calls, I have noted that they asked for the last 4 of my SSN, not my business Employer Id Number (EIN) or Tax Id Number (TID) to pull up the account information. Therefore, is it a sure thing that I am on the hook for the debt personally? Thank you!
Who is the creditor?
Who is the last place you heard from trying to collect on this account?
It is more likely you gave a personal guarantee, as most of us do in these situations. It is more likely when your social is tied to the account.
The creditor is US Bank. I received letters from ARS National Services Inc. in November & December 2021 saying that the account was placed with them. I have not called US Bank to confirm if the account is still with ARS. This debt is not showing on my credit reports so far. I was not sure how to proceed.
If settling the debt is still your goal, how prepared are you to pay a settlement of between thirty five and fifty percent of the balance?
I would like to settle this. I have to check with someone, but the 35 percent might be within reach fairly quickly.
If your goal is to settle, and you know you can secure the funds, it is just a matter of contacting ARS National to negotiate.
If you want help we have it available.
Thanks Michael! Just one more question. I was going through the letters that I received from all of the previous contingency debt collectors on this account. All of the letters are addressed to the business name only and to the business PO Box, not my home address. ARS sent two initial letters: one addressed to “the business name” and the other addressed to ” ‘my name’ Re: business name” – both to the business PO Box. Is there any significance to the addressing to business name versus me, with regards to a personal guarantee on this account?
There could be something to this, but my experience suggests the way these have been mailed is normal with a business credit card or loan.
Thank you again for your time & help!!
Not sure if I can ask here, I have an Amex business card, with the business name, and my name, does not show on my personal credit report. The balance is 30k I cannot keep up on the minimums, I am however current on payments. How would you go about a settlement without the risk of being sued?
I see that you submitted a consult request. I sent you the link to pick the day and time you want me to call you. I can cover what your American Express debt settlement strategy should look like on that call.
I’m having to close my insurance business. I personally bank with US Bank and my LLC business and platinum card is with US Bank. The credit card was structured that the business is liable for the debt first than me personally. I’ve taken a job now that pays much less and can barely afford my mortgage. I’ve closed the business and dissolved the LLC. I have $5.100 balance on the card which has a $7,000 limit. I only made $162 with the business. Next card payment is due May 10th and I’m not behind yet but can hardly afford current bills. Called bank but they couldn’t help me, was transferred to their debt collection but they couldn’t help either because I wasn’t behind yet. How do I approach to negotiate a lower settlement? Let it become late then call back their debt collection dept? If so how do I approach, what do I need to do or say and who should I talk to?
Your business account with US bank can be settled for less much like a personal account can be.
You need to be several months late before you can get a decent settlement outcome.
How long will it take you to have about 40% of the balance owed?
Well written and to the point. I appreciate the detail in this article!
Hello,
We have a small business (C-Corp) that is soon to be closing. We have reached the point where our revenue is now less than our expenses. We may be able to sell our customer base for somewhere in the 100k-125k range. We also have inventory in the 10k-15k range. Outside of that, we really have no other business assets and minimal cash in the business account. We also have next to nothing personally as we have not been paid by the business in almost a year and have used up all of our savings trying to keep the business going.
As far as debt in the business, we have a US Bank Credit Card at 40K and a US Bank LOC at 100K. Both are unsecured but personally guaranteed. We also have a loan with Key Bank at 33K that is secured with inventory, equipment, receivables, etc. We also have 75k with our main vendor and about 25K with other misc vendors. All told, we have approx. 275K in business debt.
My question is, if we do end up receiving anything in the sale of our business, is there any chance that we could settle with these companies for 35%-40% of what we owe? Would really like to do that instead of bankruptcy.
Thank you for you help.
Your goal is reachable, but will depend on what you get for your customer base. Also, timing can be an important factor. Call in for a consult this week and I will get more details and sketch a map for you based on those creditors and the timing of events. You can reach me at 800-939-8357 ext 2, or reply to the email you get these comment notifications from (those all come to me) and I will schedule something in response.
Hi,
We have sold our business at a loss. After the sale proceed distribution, we are left with about $22K in Wells Fargo Business Line and Credit Card loans.
As LLC members, we have personally guaranteed these loans. Since the business has no more income, what are our options in settling these debt without affecting too much of our personal credit?
Do we have to let it go into default before Wells Fargo with talk to us about settlement? Or would we have to file business or personal bankruptcy?
Thank you for your help.
You can settle your business loan and credit cards with Wells Fargo. I typically target anywhere from 40 to 60 percent. You do have to fall behind with payments several months.
You can fill in the talk to Michael form in the right column if you want to go over the situation with me on the phone.
I need help with business credit card debt
You can schedule a phone call with me here: https://calendly.com/debtbytes/15min
We will talk through workable strategies for your situation and goals on that call.
a question, my business did bad last year and i have over 40k in cc debit i cannot pay, i have not been served any lawsuits as it has been about a year since i last paid on them, i am self employed and have llc out of wyoming and ein for each, but on the bank accounts it shows the company name, llc and my name, but the ein, is for the llc is associated with the account. if they get a judgement, can they levy those accounts, thahks
Business bank account levies, from judgments against you personally, are not likely. Your bank needs to match the name and tax payer ID. That cannot happen with your EIN.
Always a good idea to run questions like this by an experienced debt collection defense attorney in your state.
Years ago, when we were in business, we used a personal credit card for slower times, the Corporation was dissolved, We did not go bankrupt. The credit company has now levied my personal bank account.
We have an opportunity to climb back, using borrowed funds. A checking account will be required. My bank explained, a new account may also be levied due to our SS#. Can we form a LLC and begin a account that will not get attached? If no, do have any suggestions.
Thank you for your time, E.L.
E. L.
Fill out the talk to Michael form in the right column Ed. I will see that and email you to set up a phone consult. You may not need the bank account before you settle if you are ready to fund a deal now.
Hi Michael,
I’ve read through quite a few of the comments below and think you may be a good contact for me to reach out to. I own an LLC (85% me, 15% my husband). It’s an s-corp that had high income (about $800k/yr) but has been declining in the last couple of years. We have maxed out a $90k credit line (with CHASE) and also have an additional credit card with Chase for about $7k (I am on the hook for personal guarantee on both). We’ve managed to get Amex taken care of over the last couple of months but really have nothing left to take care of the Chase cards.
We were web-based retail and our inventory’s true value remaining is only about $20k (that assumes we can actually sell it… we have been liquidating over the last year to cover business bills and other expenses).
We purchased a home summer 2015 and keeping it is our primary goal (we are in OR). We do have equity in the home, however our incomes will not support a HELOC right now. My husband has started a new business and we need to protect our credit (as best we can) for this business. I have started a new job, but with my income it will take FOREVER to pay off the Credit Line. To make matters worse, the credit line is on an auto draft from the business checking account– that Chase don’t seem to care if it has any money, they pay the credit line and send my account below $0.
So in summary, we owe about $97k to Chase, I don’t want to mess up our credit- for future plans, I want to keep our house. We do not have money to pay a settlement to Chase and likely couldn’t pay the 35-40% to Chase by the 7=8months after default either. I don’t want to keep throwing good money after bad, but really don’t know what to do other than keep paying the monthly payments. (and I’m not sure how much longer I can do that with a straight w2 job.)
Call in for a consult and I will cover how you can do a long term settlement with Chase, or at least help you determine if it is feasible. You can reach me at 800-939-8357, ext 2.
Hi Michael Bovee,
My question has to do with a Voluntary REPO, I Co Signed for my ex husband back in 2008 & in 5/2011 he could no longer make the payments for the car I decided to return the Escalade because I didn’t drive or have a license and I definitely couldn’t afford the payments,now the Repo has been on my credit for 5 years & it has recently affected me and I am considering settling the account but I don’t know if thats a good idea or even worth it… Can you give me some guidance or advice???
Call me tomorrow for a consult at 800-939-8357 ext 2, or fill in the Talk to Michael form in the right column of this page and submit that so I can email you back and set up a time to talk that works for you.
Depending on what your goals are, it may be a great time to settle, or it may be better to just let it roll off your credit in a couple more years.
Hi Michael,
I have Chase credit card debt totaling $57,000, 80% of which are business charges on my business card, all cards are not yet delinquent and have 10.49% APRs. The S-Corp is no longer in operation. I have one checking account, which is through Chase. I also have about $100,000 in prior business taxes, vendors that I owe, and installment debts. I’ve been stuck after just paying off the smallest balanced card. Layoffs and pay cuts at work have started so I wanted to reach out to you before I get myself in a bind.
Due to my income, I wouldn’t be able to file for bankruptcy. Given that all my revolving debts are current, that I have installment debts, and I have the potential to be laid off or take a pay cut, what advice can you offer as far as options that I have? If I take a pay cut, I won’t be able to make any more payments to Chase.
To cut all ties with Chase, I opened a new checking account at a local credit union. After reading all the advice you have on CRN, it seems like timing is crucial to not lose an opportunity. I read your post on being prepared to answer questions when negotiating a settlement. I had a couple questions that would put my mind at ease and be better prepared.
Will Chase be able to see my new checking account and the balance?
Would they be able to see my reported income? I do not have family to borrow from so my only source of funding a settlement will saving a portion of my income.
If I go the settlement route, should I close the credit cards or leave them open?
After non-payment for 90 days, it sounds like Chase will try to collect by settlement first, then contract with a third party to settle with me, then sell my debt to a collection agency, then the potential to be taken to court. Which is the best time to settle without losing my opportunity to settle at all?
Chase will not be able to see your new checking account, as those are typically not a trade line item on our credit reports. Chase will not really be looking at you this close.
Creditors and collectors can get a good sense of what you make depending on what your previous and current employers are. Here again, this may not be all that important when negotiating Chase debt, as it can be when settling with other creditors.
If you stop paying your accounts they will be closed shortly. Whether closed by consumer, or closed by creditor, it will still be as big a negative on your credit reports, as you have to be late paying long enough to get an affordable settlement. There is little to be proactive about in this regard.
Based on today’s trends with Chase, the best outcome will be settling with the first or second agency that gets the account. You would want to avoid the account getting sold if at all possible. This will mean having resources in place to help you fund a settlement at between 7 and 10 months of being late.
These are trends that apply with Chase accounts. Banks have different percentages and timing in order to optimize results.
Michael,
How would I know when the second agency would be taking over the account from the first, is there any type of warning? I would assume that here is where a fine line between the best time to settle vs losing a favorable opportunity to settle. For Chase, are there golden times to try and call for a more favorable settlement?
If my plans changed and I wanted to buy a house in the near future (within in the next 12 months). I see two possible scenarios: purchase a house before my credit score is affected or wait for my credit score to improve after the hit.
If I went with the first scenario, am I overlooking any potential hurdles (besides the actual financial obligations) or how I may be affected?
If i went with the second scenario, how long would I need to work at repairing my credit score before qualifying for a FHA and/or a conventional mortgage loan?
Thanks for the great advice! I like to know what to expect and when to expect it to better prepare myself so you have been a great help!
Timing is key, but with the debt collectors these days, and not with Chase. It used to be the case that you could get the best outcome settling directly with Chase, but that isn’t so now.
The most favorable settlement and timing can be collection agency specific. Post the name of the agency you end up hearing from and lets go from there.
One obvious impact to buying now or buying later will be the amount of loan you can afford. Your DTI is better without the large balance owing (so after settlement). While your Debt to Income may be better without the large balance owed, having a collection showing may impact the interest on the loan. Not so much with FHA, but it can with conventional financing.
One account settled on your credit, among many positive ongoing trade lines, will prove you have a very elastic credit score. It bounces back quickly.
Hey Michael,
So I met with a mortgage broker at my credit union and was pre-qualified for a loan. They don’t do FHA loans but do 0% down as long as we have some money saved up.
A couple questions came to mind that I wanted to bounce off of you:
1. I checked my credit report and didn’t see any of my business debt on there. While that makes sense, would anything show up if I stopped payments on my business credit cards?
2. The broker said that they won’t pull my credit again before preapproval expires. That being said, would missing credit card payments of anything business related now affect my chances of buying a home as long as I buy before the preapproval expires?
I appreciate your reply in advance. Thank you!
Missing payments on business accounts can show up in the first month on your personal credit (when you are on the hook personally), but I more often see them appear on your credit after 3 to 4 months of missed payments.
My husband signed a personal guarantee for amex and visa cards about 15 years ago, for the business which is an s corp. I also have a card, Business name then my name on it. I became the 100 percent stock holder for the last 5 years. I never signed a personal agreement I did not know that he had until now. The past few years has been very difficult and cash flow was limited. I needed to use the credit cards. I continue to make the minimum payments plus a couple of hundred dollars more each month. I never missed a payment yet. The debt combined on 5 cards is 90,000 dollars. We sold the business in an asset sale, and are now retireing and will not be making an income. The sale proceeds thus far has paid for our vendor bills tax and 401 k lliabilities. there will be no more money available to pay the 90,000. We also have an underwater mortgage on an Investment property. Without income we will not be able to keep paying the 2000 dollar mortgage .Even with full rental, the out of pocket expense will still be 800 dollars per mos. We have tried to sell it for what we owe, but no bites. I never signed a credit cd personal guarantee when I took over the business. We jointly own real estate and we want to protect our assets. we own my daughters house on paper but she & her husband have invested all of the money, their equity is 140,000 dollars. Our home is protected with homestead, but not theirs. .We are afraid of judgement leins on her home. We also have excellent credit and don’t want to lose it in retirement. How can we overcome this dilemma . Should my husband balance transfer the debt to 0 interest cards . I am not sure how many transfers or for how much $ will be offered. to him. I am reluctant to do the same . I do not want this debt to become comingled personally, because we are afraid we will lose the deed of entirety protection , that we think can protect the properties. There are just so many questions and it appears, not many good solutions. We would appreciate any advise. .
You are in a tough spot for sure. I do not recommend taking out other loans or balance transfers when you cannot pay those pack either.
Call me for a consult, or fill out this request. I will be able to dig as deep as I need to in order to offer some actionable feedback over the phone.
I am a partner is a s corp that owes $220,000 to chase for a business line and loan.the company is now closed chase is looking for a judgement. My partner is filing personal bankrupt leaving me holding the bag, we signed personal guarantees we both own homes with our wives. Chase wasn’t willing to settle on a 25% offer from me. will they go after my home?
How long has it been since you last paid Chase regularly?
There are instances where it is difficult to settle for the best savings rates. Much of that difficulty comes from either account behavior or how collectable you appear. Give me a call to go over some details and I can help you determine a strategy going forward. You can reach me at 800-939-8357, option 2 rings to me. I am on the phone a lot, so leave a message if you reach voice mail.
In the process of shutting down my retail shop, which is an llc, by the end of this month. We have $8,000 in credit card debt with Wells Fargo on a platinum business card. Can’t find the paperwork but from my research assume I this is personally guaranteed by us, the two owners. Should we start negotiating the balance now? Or miss this months payment and negotiate later?
No real substantive negotiations are possible while you are current. You can work with the collections department at Wells Fargo in a few months. It is sometimes better to wait for an account to get to Wells Fargo’s recovery department before you negotiate the best settlement.
You will find any settlement you negotiate optimized for savings can be between 4 months delinquent and anything beyond that.
Heavy documentation is often required when working through internal collections, so the early months.
I had an account through an LLC with 5/3 along with a personal credit card with them. How will me trying to pay off the personal card affect the one through the LLC. I was influenced to do this LLC and don’t quite understand how, and/or if I can be held responsible for anything done under the LLC accounts. I was told I wouldn’t. Please help! Trying to get my life back on track and pay what needs to be paid. Thank you!
You will want to find out from the bank if you are personally liable for the account in the LLC name. If your social security number is associated with the account in their system, it is a good chance you are personally on the hook.
How much is owed on the LLC credit card or loan?
How much do you of Fifth Third on your personal account?
Are you current on both? If behind, by how many payments?
Owned a small painting business. Have a LLC checking account established at a bank ( Huntington). Uses the account to cash checks for our business. The BANK deposited one check in the amt of $7000.00 into that account twice. We inquired about the balance, they insisted it was correct. We waited a few weeks to cash out the money ,in case it was an error, then used the money for expenses. 3 months later, the bank sends us a letter stating that the deposit was entered twice, and that they are withdrawing $7000.00 against that account. We cannot pay it back and it is a accruing fees, and will soon go to collections. That business is no longer and the bank has offered to set me up with a business loan ($15,000) to pay that debt off. I do not have resources to pay that off either.
Question:
The bank account was opened under the EIN number, can they post this collection on my personal social social security number or effect my other bank accounts that I share with my spouse?
Based on the limited information you shared I would not expect this to show up on your individual credit reports. Did you open the bank account with an EIN or your social?
Are the other bank accounts you have concerns about with the same bank?
I had a small S-Corp, a marketing and design firm, that did not whether the economic downturn. In 2012, I dissolved the company and struggled to take freelance jobs in an effort to continue payments on the $50k unsecured Wells Fargo line of credit I was left with. In January of this year Wells doubled my monthly minimum payments, making it impossible to continue. I began talks with Wells and was assured that I would not receive a settlement of less than 75%. That’s when I called Michael. 50% was what I could manage, and all that I could manage, and he made that his goal. It didn’t happen as quickly as he’d hoped, but he stuck with it and negotiated my 50% settlement. His guidance throughout the process was invaluable to me. I recommend him wholeheartedly.
Hello! Thank you for your time.
I have a question, my husband and I have owned an award winning remoding comp at now for 11 years but after the market hit and some clients could not pay and we felt bad for them so we didn’t sue or anything in a timely manner along with an unexpected liability insurance bill (49k) we have to file personal and business chapter 7.
My question is this I have a business LOC at Bank Of America that we signed as personal guarantors that we out the 49k on and have paid the minimum or more for the last 9 years and have had to use it again. It’s maxed out at 50k. The problem is we also have out home mortgage at B of A as well. If we file and get to keep our home will B of A attach the LOC balance to our home loan or add it as a second mortgage? I’ve been told they do that.
Also I have my car loan and a visa that I maxed out at my credit union. I will be able to keep my car but I was also told that they will attach the 20k due on the credit card to my car loan. So I am in the process of refinancing my car loan at a different bank before I file chapter 7 …….
Please advise!!!
Talk to your bankruptcy attorney, but transferring the car loan was likely not necessary. The bankruptcy would trump the cross collateral clause with your credit union, so the credit card discharge would not impact the secured loan. If for some reason it would, and the rate you get with a refi is better than the one you have now, go for it. You could also consider handing in the vehicle and finding something economical to drive around in for a year or two and then get another car loan.
This was a straight business LOC with BofA right… not an SBA loan? Unless you find that you put up your home as collateral for the business LOC with Bank of America, I do not think you have anything to worry about there.
I recommend reading how to find and hire your bankruptcy attorney, and also how bankruptcy hurts your credit and other financing opportunities.
Let me know what you find out about the credit union cross collateral issue.
I own an S-Corp in North Dakota that has fallen on hard times since the oil market tanked (we’re in oilfield services). We have settled almost all of our debts through payment plans that are doable but are left with a $200K debt on an Amex open business card. The balance was due in May, we have made payments here and there and are now on a “payment plan” for the time being with Amex’s collection agency at $2K/month. The debt just showed up on my personal credit and dropped my 780+ credit score 100 points and I’m sure will continue to drop it. How likely would it be A) to negotiate a settlement of either 30% of the balance or 3-4K a month until balance is paid off, and B) get Amex to either take it off my personal credit. Any advice is much appreciated.
It is possible to negotiate settlements with AMEX in the range you need, but it will depend on who the account gets placed with, and some other factors.
It may be a good idea to speak on the phone about the entire situation. There may be other accounts that could be set up with a better and more affordable resolution, which can free up cash flow that is better used with AMEX.
You can reach me at 800-939-8357, choose option 2.
I am one of two partners in a home construction business (S Corp). Since 2010 we have been struggling to stay in business until the home construction market in our town “comes back to life”. After 5 years of very little work, and the partners taking no pay from the business during that time, we have finally decided to close the business. The only business debt we have are two credit cards: Capital One – balance $18,000, and Chase – balance $8,000. We would rather not declare bankruptcy. We would like to negotiate a settlement with the credit card companies and close the business. We have only one asset of the business left that has any value to sell, which may net approximately $10,000. We would use this money to make any lump sum payment to the credit cards. I am also the partner that signed the credit card agreements in the beginning and am wondering if they can come after me personally. Also, as yet, we have not missed any payments, but that can’t continue much longer.
After reading your webpages on debt settlement negotiation, I think I understand how to proceed with the credit card companies. I will begin monthly contact with the credit card companies after 60 days delinquent, and work toward debt settlement after 120 days – unless you have a different suggestion.
My main concern now is on the personal side. Both my spouse and I worked for the company and have not had any reportable income for 5 years. (We have been living off a modest inheritance my spouse received) We have a personal credit card with USAA -balance $10,000, and a 2nd mortgage with USAA – balance $12,000. Our home has a mortgage balance of $20,000 – equity is $150,000. We are current on all payments. We are both looking for employment and I feel we will be employed within the next 30 days. Once we have “Income history” my thoughts are to refinance our house and incorporate the personal credit card and 2nd mortgage in the refinance. Any thoughts or suggestions?
It could make sense to do a traditional debt consolidation on the personal credit cards.
As for settling the business credit cards, you are going to likely be a couple thousand dollars short of being able to do both Capital One and Chase business loans. How long will it take to get 2k to add to the $10,000.00 you are expecting?
Early this year I fell behind on several debt payments due primarily to reduction of business cash flow which has been gradual but my total income has dropped by 2/3rd since my daughter experienced a brain injury during heart surgery in 2010.
I sold my remaining business July 1st and worked out payment arrangement with one collector on a card balance of $19,000 am now current on my auto loan but have roughly $13,000 on another card that went into default. I was served papers and have responded to the summons, collector filed for a summary judgment but have a hearing on Thursday.
I have another secured (personal and business assets) loan outstanding that is accruing interest only but will need to begin to amortize or restructure in November. Balance at that time will be $150,000 however the lien holder is a friend and is willing to work with me until my youngest finishes college (4 years) . He considers this an investment in me and the business model that I have been developing while trying to maintain my other business operations.
At this time I have no income but expect to have steadily increasing cash flow within 120 days. The buyer of my former business made the investment in order to provide me with some cash while we work together to develop my new business. This will provide support for roughly 6 months.
I am very willing and desire to negotiate terms for repayment that can be accelerated as cash flow improves but want to avoid a judgement. Creditor initially expressed willingness to consider but collections Attorney is pushing for summary judgement. I have done the best that I can to manage a severe personal crisis and maintain family stability while we invest in our child’s recovery. I want to make sure that the secured creditor is not compromised by a judgement that could force liquidation of assets that are pledged as collateral against the prior loan.
My plan at this time is to appear in court Thursday AM with a financial summary but am most concerned with the possibility that they may try to attach to current cash on hand of roughly $45,000 which I will need to get us through the next several months until I begin to receive income from new operations.
Negotiating and settling business credit card debts is better achieved prior to being sued, but there are still things you can do after the creditor files with the court. If you can survive default judgment you will have more time to work with, but getting something in place now is still possible.
I could offer better feedback if I knew who the business credit card is with? Who is suing if different than the original creditor (debt buyers buy up unpaid business loans and unresolved credit cards)? Who the collection law firm is that is suing?
I moved your post to this page as it is more relative to the topic.
Thanks Michael,
My business was a sole prop LLC and this card was actually persona with Wells Fargo.
Wells Fargo is named as Plaintiff and Attornery is Richard Roosen from Mt. Clemens, MI. (Roosen, Varchetti and Olivier PLLC)
The Motion is for a summary disposition.
Give me a call at 800-939-8357, choose option 2. I can cover more ground over the phone, and more quickly.
Hi Michael,
I’ve been paying regularly on-time minimum monthly payments on my business line of credit with Wells Fargo in the hopes that something would break and I’d be able to pay off the $49k in chunks. My business was an S-Corp and dissolved almost 3 years ago in 2012. Wells Fargo more than doubled my monthly minimum payment in January, making it impossible for me to meet them. I offered a settlement amount of less than 50% and submitted my financials for review. They acknowledge receipt. Denied, and then told me they never received my financials?!? I’ve gone more than 3 months without paying the minimum monthly payment and have offered $300 in good faith so that I can offer another settlement amount. (They told me that the $300 was required to make the offer.) They rejected my 50% payoff offer, told me I’d have to pay $45k. That’s all they’d accept. They told me they do not negotiate settlements. And they wouldn’t even entertain another settlement offer from me for a period of 3 months. I don’t understand this logic. The funny thing is, in January when I realized I couldn’t keep doing this, I went to a Wells Fargo branch and asked a rep there if they’d settle. He called on my behalf and was told that they’d entertain 50%?!? My situation – I don’t look bad on paper. I pay other bills on time, but I’ve paid to the tune of $30k in interest on the line of credit since 2006 – I can’t keep doing it, especially when the monthly minimum jumped from $300 to $650 plus. What is your advice? Will they eventually work with me? Should I make any payment at all in good faith? Will they sue me? Or should I take the lump sum offer I’ve saved and borrowed from family and just pay the loan down to half the amount and see if they’ll negotiate better terms? They keep suggesting I “transfer the balance to another bank. Wells Fargo doesn’t negotiate the way other banks do.” This feels like they’re just trying to get rid of the problem child and would put me in no better circumstances.
Thanks for any advice you can offer.
I would suggest you call in for a consult about the issues and how to overcome them. You can reach me at 800-939-8357, choose option 2 (rings to my desk). If you get my voice mail be sure to leave a message and I will return the call.
Hi Michael, I’m now unemployed and owe Capital One about 10k, most of which I’ve used for living expenses. I’m still current, but I have no way of paying that back anytime soon. I’m even considering bankruptcy. My question is how often does Capital One contest bankruptcy filings? And would my other choice be to ge delinquent on my few accounts with them for 5-6 months in hopes of a settlement offer? I guess I’m wondering what the best approach is now that it’s 2015. Thank you!
Are any of these business credit cards? If so, how many are business accounts and how many are personal? What are the balances owed on each?
When and whether to file bankruptcy is something I approach with math first, followed closely by a 2 to 3 year view of your goals. Post the debt details in a comment reply. Please also post how much money you will have access to over the course of 12 and 24 months in order to save up to negotiate and settle the debts one by one.
After highlighting the cost/time benefits and limitations of bankruptcy versus settlement, we can hit how each will help you achieve your near future goals.
Lease for computer equipment in the amount of $16,000. Business closed and I offered to return the equipment. The lease company refused. I personally guaranteed the lease. I could not afford the monthly payments. They charged off the debt almost 9 months ago. The charge off shows on my credit report. Now they have hired a debt attorney and are suing for the $16,000. Can they sue although it has been reported as a charge off? I was told this is a violation of the Fair Credit Reporting Act.
Yes, they can sue even though the debt has been charged off. Charge off is an accounting function lenders must follow, but that does not make the debt go away.
The credit reporting of a charge off is common.
What are your goals for this debt?
Are there any other debts besides this one that went unpaid, or soon will?
This is the only debt. I’m assuming they’ll be more willing to accept a settlement offer now. I’ve been willing to settle for the return of the equipment and $4,000. That’s the best I can do but before this they weren’t willing to budge one bit.
I had a small retail business (incorporated) which closed in 2008. There was a business line of credit with Wells Fargo for 33,000, for which I signed a personal guarantee. I have been paying just above minimum on that credit card / LOC since then (usually between 350 – 400/mo). Last year, I was laid off. I have found some contract work since then, but have not found another full time job. My earned wages for this year will be around 33,000 The current balance on the LOC is just over 27,000. I have thus far not been delinquent on any payments, but cannot sustain the current monthly payments any longer. I would like to negotiate a way to continue paying off the debt, but with a payment plan of maybe 150 – 200 per month. I would gladly pay more when my job situation changes, but would like to establish a reasonable payment plan. Hopefully, I could negotiate some or all of the following elements: reduction in interest rate, reduction in balance, lower monthly payments. I do not have a chunk of money available to fund a payoff of a reduced balance. I have always paid bills on time and have 2 other credit cards which I want to keep separate from any debt relief actions. Those balances have usually been very low, but I have recently had to use them while seeking new full time employment. Total on the other credit cards is approximately 10,000. I have little savings left, but a cushion for maybe 2 more months of covering monthly expenses. I am actively seeking employment and expect to be working again, but not sure what job / salary I will find. I want to be responsible both in paying my debts and maintaining a good credit rating. How should I approach Wells Fargo to negotiate a plan as described above?
Thank you.
Long term payment solutions with Wells Fargo are not going to get you where you need to be. The best case lower monthly payment scenario will be roughly 450 dollars. Have you talked to Wells Fargo about any temporary payment options they may have, or are you already on one?
If you are running out of money before you run out of month, something is going to have to give.
Why is it you want to hold on to the other 2 cards?
What credit and financing goals do you have in the next 24 to 36 months that you need good credit for?
my spouse and myself own a small LLC business for the last seven years but recently has not been doing well financially. My question is this: we have both our business accounts and personal accounts at the same bank. Recently my personal account had a large amount of money taken out of it to pay for our company’s credit card that was over 45 days delinquent. Our company is LLC so we did not think the bank could take our personal monies to pay on the business credit cards . Can you shed some light on this situation please? and where can I read up on how we can protect ourselves if tis should happen again?
You may have cross collateral clauses between your accounts. This is a typical practice of smaller state and regional banks, like credit unions.
You can talk to the bank about that being a problem, but they are not likely to change the boiler plate account language they use. Nor will they want to limit their ability to get paid.
If it were me in your shoes, and my concerns were about this happening again, I would set up my other accounts at a different bank.
I am a chiropractor and a year ago I opened a second business that was physical medicine, basically a medical corp. I opened a $100K line of credit with chase and had several open credit cards with no balances. This LOC is secured with the possessions in my Chiropractic business. Over the course of a year we have maxed out the line of credit and $150 k over 7 credit cards. The reimbursements from the insurance and the capabilities of medical staff changed under insurance guidelines so much that we closed the business down. The chiropractic business also took a hit and now is just breaking even, with only myself and 1 employee, instead of the 8 employees we used to have. We are no longer to make the payments on the cc’s or the line of credit. My understanding is that the credit cards I can settle after a period f not paying, but I do not know about the LOC that is secured. There is not $100K worth of assets left in the business, so if they were to repossess them they may get $30K worth of stuff. Am I able to settle the LOC as well without Chase taking my belongings in the business? This business is viable and I am attempting to rebuild it. I have always had a credit score over 800 until my accounts began to run high balances. We have not missed a payment yet, but will start in the next payment cycle. At the age of 41, I have put everything into the business that failed and have no savings left. We also have a chase cc and a southwest cc (owned by chase) as well as our bank accts, both business and personal with chase. Our mortgage is also with chase. I am able to keep paying the mortgage and maybe the LOC.
You do have some options. Settling the line of credit along with the credit cards would be preferred.
Do the credit card totals and line of credit combine to the 150k, or is the total 250k?
We dissolved our LLC in April this year and my husband has taken a short term job in a dangerous location in order for us to save a little bit of what we owe for personal guarantees. Our priority debt is IRS owed and is for payroll taxes, that totals 30k. We’ve already spoken with the IRS and worked out a short term payment plan. Next, we owe Wells on a business line, personally guaranteed by my husband, $75k. Then USBANK we owe 30k. Capital one we owe $20k – all personally guaranteed. We owe one more private company 40k. Our business was our primary source of income. My question is multifold: first, is it reasonable to assume that this total debt (aside from the IRS) we could settle for 35-40%? We are trying to work through it on our own and are several months late – we are making minimum payments each month that the chargeoff will occur and have been in contact regularly with wells and usbank, they’ve given us minimum amounts due and by certain dates each month. This simply buys us time until my husband returns and we are able to take what he’s made and put it towards these debts. I am not working, so we are now a single income family. Once he returns, his salary goes back to normal and we will especially not be able to afford these monthly minimums. if a card charges off and our home was never used as collateral, are we at risk of losing it? It’s the only consistent thing in our kids lives and this closing of our business has already turned their worlds upside down. We are applying for a home equity and plan to use that to pay and negotiate settlements as well. Chargeoffs on our credit reports, if we don’t need to buy a home or vehicles or apply for any loans, it will eventually drop off, correct? Can we be sued on a personally guaranteed debt for a dissolved business when there is no money to collect against at all? We live humbly and our business was our life. We reinvested all we ever made from the business – plus A LOT. The 40k I just received a tax notice saying it will chargeoff in just a week – they refused to negotiate with us at all. It was 40k or nothing. Would going through a debt settlement company be our best bet or are we better off going it alone to try to save as much as possible to settle with? This is a painstaking painful process and outsiders don’t realize how horrible it feels to have left debts outstanding like this. If only my morality could pay the bills.
It is reasonable to expect to be able to settle the business accounts with Wells Fargo and USbank for 35 to 40 percent. Capital One is not as reasonable.
When does your husband return. Will you have enough of a cash war chest at that time to settle all business loans and credit lines?
What amount of equity can you realistically expect to pull from your home? What are your current credit scores?
The charge offs and collections entries on your credit reports will stay for as much as 7.5 years. If those accounts are settle, and updated as resolved on your credit, the reporting blemishes will not necessarily hold you back credit wise before the 7 years is up.
Who specifically is the 40k account with?
Yes, there are some limited instances where letting a professional negotiator handle an account or two will yield a better outcome, but I need more info to offer you better feedback about that. Generally speaking, it is better to save money on fees so that your available cash resolves debts more quickly.
Try not to sweat the difficulty in getting through this. It is tough, but I can help guide you so that there are no surprises. When there is no unknown, it is easier to manage.
Hi I have a question.
My brother in law had taken over our family business/corp. my brother and I had signed a personal guarantee for the lease for 3 years. There is a year and a half remaining on it. He has decided to close the doors. My question is, can I try to negotiate with the landlord on the personal guarantee and offer him a lump sum to settle?
You can negotiate a lease pay off, and it is often realistic to succeed with some level of reduction.
As far as the personal guarantee, not likely. I would not do it in his shoes. Not knowing the business would be closing up.
Hi Michael:
I had to dissolve my corporation in April of this year
after 14 years of being incorporated because of sharp
drop in my monthly income from the business. I am
a one man business owner which like I said the business was
registered in CA as an S Corp back in 2000. During these years
I had few credit cards from wells Fargo where I had all business
checking account and one business credit card and one line of credit.
I currently owe about $90k on 4 different credit cards which all were
issued to my Business name and of course on some of them my personal
name is also printed. I am between 60 to 110 days late on these credit cards
and line of credit (I owe $60k on the line of credit alone)
My questions is, can the issuing bank (lenders) go after me personally to
collect what my business owes them or because I was incorporated, they
can not go after I personally and must try to collect from the corporation which
like I said is now non-existence? I have been getting calls from their collection
department and I have been telling them that my business went down and I am
currently out of job and facing financial hardship. Wells Fargo which I owe about
$70k has agreed to reduce the principal by 50% but only can give me 3 months to pay which I can
not afford to do. Amex which I owe about $10K is willing to stretch it out to 12 months payment.
What kind of advise can you give me? Do I have any protection because the business was a corporation ? Should I drag my feet to 5 or 6 month until the lenders sell the loan to a 3rd
party collection agency and try to pay them 30% of the principal? Keep in mind through it all,
I would like to hurt my FICO as little as possible in case I need to get a home loan a couple of years from now. My FICO currently is at $675 but I know it will go much lower if the loans are charged off.
thank you for your help
Mike
Identify which accounts you personally guaranteed. Ask both Wells Fargo and Amex which accounts you are on the hook for personally, as those are the ones you will focus on a plan for first.
Wells Fargo will often settle for less than the 50% they are offering now, but these higher balances are going to go through extra layers of executive approval when you negotiate the lower pay offs.
You will have to pull together the money to settle within the 94 day limits Wells Fargo is telling you about. That is pre charge off settlement guidance from their primary regulator, the OCC, not a policy they have set for themselves.
If you cannot afford a settlement now, negotiating later could become more complicated, and cost more, but not always.
How collectable do you look? Are you paying other personal credit cards on time? How about making on time car or mortgage payments?
The Amex deal is not a settlement where you pay less than what you owe, correct? Is there room in your finances to pay Amex right now?
Hi,
will a business card ever stop showing up on your personal record if it showed up once for a late payment of 60-days? Can it be removed if brought up back to current?
Who is the bank reporting? Do you have both personal and business accounts with them? Have you been banking with them for some time?
The bank in question is Chase. I do have both personal and business accounts with them, and the business account is in my name as well (solo proprietor). The account was 30 days late couple of times but it was not reporting that to personal credit reports until it was 60 days late in May. I made the payments to bring it current, but I am not sure what will happen next. They closed it last month. This account had been opened for three years.
Thank you very much for your response.
You could ask Chase to remove the 60 day late from your personal credit, but if you are the personal guarantee for the account, they do not have to, and my experiences suggest they probably won’t. But an effort at asking for good will is not too much trouble. Can you pay off the balance, or are you only able to make payments monthly? Are there other issues?
Hi Michael,
I have posted a question with subject
“My lawsuit case information showing up on google search”.
Where Can I see my post?
Thanks,
Sam
Sam – The question plug in can be wonky. Can you post what your situation and questions in a comment on this page if it is relevant to settling business credit cards and loans, or if personal collection lawsuit, there is a very active page here.
Sorry for any inconvenience.