- Consider bankruptcy
Filing for bankruptcy could be the solution to your problems, but you’ll need to consult with a bankruptcy attorney to find out for sure. Only a qualified legal professional can tell you if it’s warranted in your situation.
With that said, if bankruptcy is a possibility, you’ll need to consider Chapter 13 and not Chapter 7. If you file for Chapter 7 as a sol5 Tips to Strategically Handle Personal Debt Without Losing Your Business
Alt Title: 5 Tips For Managing Extensive Personal Debt Without Losing Your Business
Being in massive debt isn’t fun. It can feel overwhelming and create constant stress that makes you feel anxious and even depressed. While forming an entity, like an LLC or corporation, can ensure your business debts don’t impact your personal life, it doesn’t work the other way around. If you have a bad personal credit score, it can impact your business in many negative ways. For instance, it can prevent you from getting a business loan. In a worst-case scenario, it can even cause you to lose your business.
As a proprietor, you’ll probably be required to sell your business to pay your creditors as part of the liquidation process. Even if you have an LLC or corporation, you might be required to sell your ownership stake in your business.
With Chapter 13, it’s a little different. Unlike Chapter 7, which wipes out debts completely, Chapter 13 bankruptcy helps reorganize debt into manageable payments, so you don’t lose your assets. You’ll still need to pay off your debts, but you’ll be making one consolidated payment, and there’s a good chance some of your debts will be reduced. If you have a steady income, it’s worth consulting with an attorney.
- Get on payment plans
Many creditors will be happy to put you on a payment plan if you’re willing to agree to automatic deductions. This is true for almost every credit card company, private lender, and even the IRS. If you owe money and are missing your payments, call to find out if you can get a payment plan that will ensure your account does not get sent to collections.
- Hire a financial advisor
One of the biggest threats to your business are your bad money habits. Realistically speaking, if you have any poor money habits in your personal life that have caused you to get into serious debt, there’s a good chance you’re bringing those habits into your business. If that’s true, then it’s only a matter of time before your business goes into debt, too.
The best way to prevent bad financial habits from hurting your business is to hire a professional financial advisor to help guide your business decisions and set you up with systems and strategies to manage your finances. It’s not easy to run a business, and managing your own finances is cumbersome. However, if you ignore the tedious nature of your finances, or make decisions based on gut feelings and quick glances at your accounts, you will run into problems.
- Separate your business and personal expenses
If you haven’t already separated your business and personal expenses, make this a top priority. Not only will it be easier to gather your receipts for tax purposes, but it will help you legally, too. If you end up filing for bankruptcy, you might have a hard time proving that some of your assets belong to your business if they weren’t purchased with a separate account. Your entire financial situation and bank accounts will be scrutinized to the penny. Make a clear distinction between your personal and business finances. Even if you are a sole proprietor and can’t get a business bank account because you don’t have or need a business license, at least open a separate checking account for your business.
- Consolidate your debt as soon as possible
Another option you have is to negotiate your personal debt through a debt consolidation company. The sooner you take care of your debt, the faster you can rest assured that your personal debt won’t impact your business. With debt consolidation, the company will negotiate flat rate payments to resolve each of your debts, and then you’ll pay the company monthly for a set number of months until the debt is paid off. Their fee is added as a set amount to each payment. It’s really easy.
Aim to be debt-free
Managing personal debt doesn’t have to keep you in fear of losing your business. With the help of a financial advisor and lawyer, you can get your personal finances back on track without risking financial harm to your business.
