In an economy that favors real estate, innovation in technology and well established manufacturing and distribution companies, other small business owners struggle to find momentum for growth.
The service sector, startups of all kinds, and heavily leveraged businesses all face threats to their continuing existence even as the market demands the very products and services they offer. But for many small businesses, if they can survive one major storm, when they come out on the other side, the future is promising. For most, that storm consists of a way to manage collection on a loan that is in default. The question is how?
In general, the best defense is an actual defense. If you’re not prepared to defend against the claims of creditors, be ready for them to pursue remedies including attachments, garnishments, foreclosures and moves against your personal, as well as business assets. So what do you do to hold creditors at bay or negotiate a strategy against them that will enable your business to survive?
By “actual defense”, I mean initiating the posture that you don’t have money to pay for the services demanded, and by making a defense to the legal actions of the creditor. So the first things you need to be prepared to do are:
- make an offer that is a small fraction of the total amount of the debt asserted by the creditor;
- prepare to support that offer with financial statements that demonstrate the propriety of what you assert you are able to pay; and
- file a timely answer or response to any Complaint or motion filed in court by the creditor.
You need a competent attorney to do these things on your behalf. Landmark Legal Series has many years of experience and a great track record of success in addressing loan workouts on large loans with many different lenders. These include settlements of outstanding loans of over $750,000, settled for less than $10,000. The legal cost of attaining that settlement was approximately $13,000 in addition to the money that was spent to settle the lender’s claim itself.
This was an extraordinary case. We forced the creditor to recognize that it had made an irredeemable error in the execution of loan guaranties relating to the primary debt, and it could not enforce its claims against our clients.
More often, a creditor will be forced to settle for somewhere between 10 and 25% of its calculated outstanding debt. Getting a better result is unusual, but there are cases where it is possible.