Tips to a Former Small Business Owner, Now Trying to Settle Remaining Debts

Question:
I had a small construction business that went under a couple of years ago when housing took a nose dive.  Some business debts remain and I am getting calls from a manager of one of my suppliers, who wants me to settle up on a $2500 account, but I have nothing to pay them. They are now threatening to sue me for the debt.  Any suggestions? Should I call the manager?

My response:
If you can borrow the funds from family and friends to settle the entire debt for less than the full balance due, then that is a good reason to negotiate with the manager.  I would not propose that you simply borrow the full amount from your friends and family, so that you would owe the same amount of debt to them. When your pockets are empty, that is the time to negotiate with your creditors to settle for much less than the full amount, such that you reduce your debts to something that you can pay off quickly to your friends, when things turn around for you.

In settling any debts, be sure that you have written confirmation that the amount you are paying will settle the full balance.  It is not unusual for a debtor to believe that they have negotiated a very good settlement, then learn later that the money paid was applied merely as a credit towards the balance, and the creditor still demands payment on the rest (or files a debt collection lawsuit) or has assigned the unpaid balance to a debt collection agency.

I have posted on Avvo.com three legal guides on how to negotiate a debt, including specific information on the documentation that should be prepared to ensure that the debt is considered fully satisfied by both sides.  Link to Avvo.

Robert Stempler
www.StopCollectionLawsuits.com

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