There will be no easy options when you are on the hook for large amounts of debt. However, if you’ve read the above and decided that the bankruptcy process is not for you; here are a few other options to consider.
Mediation & Negotiation.
You can hire a team of mediators and negotiators to attempt to get your creditors ‘to the table’ and re-negotiate debts. When this process is formalized, it is known as a ‘workout’.
Have nothing to take.
This is less of strategy, and more of a situation or circumstance, however, it is not uncommon for business owners to simply have no assets to take.
If there are no business assets to take, and your personal assets are limited (no house, no owned cars, no stacks of silver and gold, other valuables, and no income other than that of the business) then you might just let the creditors have at you.
You can expect to be sued. If you truly have nothing they can take, and you are not in a community property state, or your spouse is in the same position; one might theoretically consider just letting them get a default judgement against you. After all, what will they take?
You’ll have that judgement hanging over you for 10 years (default) and up to multiple decades if the creditor continues to renew the judgement; so, you can see why this isn’t a strategy for most people. It does buy you time though. (Keep in mind, interest is automatically added by the court, per state or federal law for time that elapses.)
Let them take it
Another strategy is just to acknowledge you owe the debts, and let them take the property you promised as collateral, income you may get from a job, etc. Again, this is a highly personalized choice, and you should consult with a bankruptcy attorney and financial advisor to see if this is truly the path you want to take.
Close down the business, sell assets, use the funds to pay off debts
If you can sell the business assets to pay off the debts in full; then you won’t have to worry about being pursued. However, few businesses are in a position to sell off most of their assets and still operate.
Chapter 13 Bankruptcy
Chapter 13 bankruptcy is a process that looks similar to Chapter 7, however, you are given a strict payment plan to follow for a number of years.
If you can do this successfully, then the remainder of debts are paid off at the end of the payment plan. In some cases, this can be very lopsided to your benefit.
That’s if you can reach the ‘green acres’ at the end of the payment plan. The payment plan is meant to squeeze every available penny out of the business while it is operating. Because cashflow is one of the most common business killers, imagine having to deal with normal cashflow problems plus a trustee cashflow. You may fail to make payments, and are right back where you started.
Chapter 11 Bankruptcy
This is similar to a Chapter 13, however, it is far more complicated with many sets of rules. This ebook will not dive into that, as it would take thick volumes to fairly depict it.
Suffice to say, unless you have about $100,000 in liquid cash available to pay a bankruptcy attorney, this option might not work. You can always go through a free consultation with a business attorney to get a preliminary idea if it is worth exploring.