With the creditors tightening their noose on borrowers and the costs of goods spiraling out of control, it has become quite common for startup owners to find themselves deep in debts. They might as well often be found turning to high interest personal loans to bankroll their businesses. However, if they are not able to put back their revenue to their businesses (and exhaust it in paying their business loans back), then the whole purpose of initiating their business is defeated. In these circumstances, you might as well consider bankruptcy, but not without considering its long term ramifications.
Read on to find out more.
Bankruptcy: What it entails and what it will mean for your credentials
Chapters 7 and 13 of bankruptcy entail different things. If you file for Chapter 7 of bankruptcy, then you would be able to get rid of all your debts – only if you have very little or no disposable income.
Chapter 13 of Bankruptcy on the other hand, seeks to re-organize your debt. Here, you ought to repay a portion of your debt based on a payment plan and with this, a substantial percentage of your debt is eliminated. It also enables you to strip a lien from the property if the fair market value is lesser than what you owe.
However, the proposition of filing for bankruptcy comes with its own shortcomings—there are serious consequences on your credit (which stay for seven to ten years), you end up finding it very difficult to qualify for mortgage in the future and you will lose all your credit cards. Your choice in this regard (i.e. of settling for bankruptcy) must be based on the knowledge about these particular facts.
Since bankruptcy leaves such a negatively indelible impact on one’s finances, startup owners are not really fond of resorting to it often. Even financial experts maintain that bankruptcy should only be considered when one has tried out all other debt relief options available in the market. Debt consolidation and debt settlement are two potent debt relief options that startup owners should consider without fail.
Consider turning to debt settlement or debt consolidation and explore their merits
Debt settlement seeks to lower the total amount of debt that you end up paying. The professional debt negotiators would leave no stone unturned to convince your creditors to reduce the total amount of debt owed by you. Depending on the type of business debts you have, you can even get up to 75% of your debts eliminated. Convincing your creditors will of course not be that easy, and that’s why borrowers prefer enrolling themselves for professional debt relief programs. These programs are powered by debt specialists who are trained in negotiating with creditors. You can consult the reviews of the various debt settlement companies before settling for their services.
Debt consolidation, on the other hand, combines all your loans into one umbrella loan and allows you to pay a lower rate of interest than what you would have paid on all your business loans combined.