If your business is struggling to repay its debts, filing for bankruptcy isn’t your only option. Depending on your financial situation, pursuing debt settlement can be a better choice. However, figuring out which option is right for your business’s needs can feel like a bit of a mystery. While it’s always a good idea to speak with an experienced Wisconsin business bankruptcy attorney as you explore your options, there are a few tips you can use to figure out if bankruptcy is the right choice. Let’s take a look at the differences between settlement and bankruptcy, and how you can choose the right option for your business.
Debt Settlement vs. Bankruptcy
Before you can make the right choice for your business, it’s helpful to understand what both debt settlement and bankruptcy can do.
- Debt settlement: This method lets you negotiate a lower payment or a lower total debt amount with your creditors. The goal is to help you repay what you owe in a way that’s more favorable to your business’s finances so you can keep the doors open.
- Bankruptcy: Depending on the type of bankruptcy you file, you can either have your debts forgiven and close your doors (Chapter 7) or enter into a debt repayment plan with your creditors that’s overseen by the court (Chapter 13). You may also choose to reorganize your business and appoint new leadership while paying down what you owe (Chapter 11).
Both options can help you get your debt under control and give your business a better chance at turning things around.
Which Option Is Right for You?
Ultimately, both options can be good choices, but it all comes down to personal preference, your total debt levels, and your long-term goals. As you start to explore your options, consider the following to help you make the right choice.
Your Total Debt
If you have lower debt levels or only have a few outstanding loans, you may be able to negotiate a debt settlement with each lender independently. But if you have larger amounts of debt, you may need help negotiating a repayment plan—and you can get that help from the bankruptcy court.
Your Profitability
If you’re consistently earning money each month and believe that you’ll be able to continue growing your business over time, debt settlement may be a better option. But if you’re earning enough money to keep the doors open but not much else, filing for bankruptcy may be a better choice.
Your Credit Score
Both debt settlements and bankruptcies can impact your credit score. But lenders typically view debt settlements more favorably, even if your score drops. Consider where your credit score is currently, what it’s likely to drop to, and how likely it is that your business will need a new loan or line of credit in the near future. If you’re sure you’ll be able to turn things around and think you’ll be ready to take on a new loan or line of credit in a year or two, debt settlement may be a better option.
Speak With a Wisconsin Business Bankruptcy Attorney
Whether you’re considering requesting debt settlement or want to file for bankruptcy, it’s a good idea to schedule a consultation with an experienced bankruptcy attorney. They’ll be able to review your financial situation and help you understand how each option could impact your business both in the short and long term.
Schedule a Consultation Today
If you’re considering filing for bankruptcy, get the advice you need to make the best decision for your business. Contact Kerkman & Dunn today to schedule a free consultation with our experienced bankruptcy attorneys.
