If you are a business owner who was overwhelmed by debt, you might be looking for answers about how to settle what you owe. Business debt settlement can provide relief, but it also raises many questions. Below, we at DelanceyStreet.com, a top tier business debt relief company based in NYC, will tackle some of the most common questions about business debt settlement. We will discuss potential penalties, crimes, and punishments, plus the strategies that we use to protect you. We will also include references to government websites and explain how we can defend you if legal action happens.

What is Business Debt Settlement?

Business debt settlement is a process that involves negotiating with creditors that were owed money, in order to agree on a reduced amount or new terms. This process can give you the room you need to keep your business alive. It is important because it can help you avoid drastic outcomes such as closing your doors.

When business debt becomes too large, you might start missing payments. This problem can lead to notices of default, which can strain your relationships with vendors and lenders. Penalties and fees can then pile up, which can make the situation much worse. Once you begin the settlement process, you are creating a strategy for survival. You are also trying to protect your business from more serious issues, like lawsuits or forced collections.

Is it Legal to Not Pay Business Debt?

Debts that are unpaid do not always lead to criminal charges, but they can cause civil cases, lawsuits, and other serious consequences. Lenders that were not paid might sue you for the full amount. This lawsuit can include court costs and attorney fees, which can increase what you owe. If the court enters a judgment against you, it can lead to garnished bank accounts or seized property, which can harm your ability to run your business.

Often, there is confusion about whether not paying business debt is a crime. In most instances, failure to pay is a civil matter, not a criminal one. However, there are times when a business owner might engage in fraudulent activity (such as intentionally misrepresenting financials or forging documents). That wrongdoing can lead to criminal charges, which could include fines or even jail time. The Federal Trade Commission (FTC), which you can find at https://www.ftc.gov/, warns consumers and businesses alike to avoid any misleading behavior when handling debt.

Are There Criminal Consequences for Business Debt?

There is a difference between honest debt problems and fraudulent acts that can trigger crimes. Fraud that was discovered during investigations can bring serious punishments. This might include felony charges that can result in prison time. For example, if you present false statements to get credit you never intended to repay, or if you hide assets while taking loans, you can be prosecuted. According to the U.S. Department of Justice, found at https://www.justice.gov/, individuals who commit bank fraud or wire fraud could face prison sentences, in addition to big fines.

Penalties That Matter

1. Late Fees: If you miss a payment, your lender can charge a late fee. This penalty can quickly add up, which makes your debt grow larger.
2. Default Interest Rates: Once your loan goes into default, you might get charged a higher interest rate. This increase can harm your cash flow severely, which can cause you to lose the ability to cover daily operations.
3. Lawsuits: If your lender sues you, you may have to pay court costs and possibly a judgment, which can end up larger than the original balance.
4. Potential Criminal Charges: If you lied on your loan application or committed fraud, you could face criminal prosecution, which can lead to heavy fines and possible incarceration.

What Happens if a Lender Uses a Confession of Judgment (COJ)?

A confession of judgment (COJ) that was signed can allow a creditor to get a judgment against you without the usual court trial. This process can happen fast. Once the creditor files the COJ with the court, the creditor might be able to seize assets or garnish your bank account almost immediately. This means your operating capital, which you rely on, might vanish overnight. Many states have banned or severely limited COJs due to abuse by some lenders. However, if you are bound by a COJ, it can be devastating unless you take action.

How Does Delancey Street Defend You If Problems Arise?

We have a team of professionals led by attorneys including Chief Legal Officer Steven Raiser, ESQ, who can analyze your case. Once we figure out your exact situation, we take steps to negotiate with creditors, which can help reduce or restructure the amount owed. If you face a possible lawsuit, we have a sister law firm that was established to offer defense strategies. Below are key tactics we might use:

1. Negotiation with Creditors
   We open discussions with your creditors and show them why your cash flow is weak. This dialogue can result in a reduced settlement or a new payment plan that was more affordable. This process keeps your business operating.

2. Review of Loan Documents
   We look for errors in your lender agreements. If we find terms that were unlawful, we can challenge them. This might remove certain fees or penalties.

3. Challenging Improper Collection Practices
   Creditors, or collection agencies that violate your rights, can be held accountable. According to the Consumer Financial Protection Bureau (CFPB), found at https://www.consumerfinance.gov/, debt collectors must follow guidelines that protect you from harassment or misrepresentation. We use these rules to push back if your creditors cross the line.

4. COJ Defense
   If you signed a confession of judgment, we can review it to ensure it was lawful. Sometimes, we discover issues with how it was executed, which can help us fight the judgment in court.

Business Debt Settlement FAQ

Below, we answer more common questions that business owners might have:

1. Are SBA loans included in debt settlement?
Yes, SBA loans that were defaulted can be negotiated, but it may be more complex. The Small Business Administration (SBA), found at https://www.sba.gov/, guarantees part of the loan, so there could be strict rules. Still, we can try to settle if you show genuine hardship.

2. Can I go to prison just for unpaid debt?
Typically, no. You don’t go to jail solely for failing to pay a loan. This problem usually leads to lawsuits, not criminal charges. If, however, you do something fraudulent, that was illegal, such as lying on your application, you could face serious legal action.

3. Will debt settlement ruin my credit?
It might lower your credit score. This consequence can make it harder or more expensive to borrow in the future. But many clients believe it is better to settle than to default or file bankruptcy. Once your debt is under control, you can start rebuilding.

4. What if my business partner does not agree to settlement?
Debt that was racked up by the business can be a shared burden. If your partner disagrees, you might need a legal agreement or a court order. We can help you negotiate with your partner and your creditors, which can prevent expensive lawsuits or forced collections.

5. Are there hidden fees?
We believe in transparency. We tell you about our fees from the start. Some debt settlement companies hide large fees. We do not. If we reduce your debt, you will save money overall, which can help you stabilize your business.

Potential Crimes and Punishments

1. Fraudulent Loan Applications
   A loan application that was filled out with false info can lead to charges of bank fraud. This offense can carry prison time and large fines. The punishment can include restitution, which means you must pay back what was lost.

2. Check Kiting or Bouncing Checks
   Writing checks that are not backed by enough funds can trigger criminal charges. If you knowingly write bad checks, you might be charged with check fraud. This crime can lead to jail time, which can destroy your reputation and your business relationships.

3. Hiding Assets in Bankruptcy
   If you lie about what you own in a bankruptcy case, you could be accused of bankruptcy fraud. That crime can lead to imprisonment, which would harm you and possibly end your business.

Flow Chart of Possible Debt Situations and Consequences

Imagine a simple outline that illustrates business debt scenarios:

1. Situation: You default on a merchant cash advance (MCA).
   → Next Step: Lender demands full payment.
   → Cause: Missed payments or insufficient funds.
   → Possible Consequence: Lawsuit or COJ enforcement, which can freeze bank accounts.

2. Situation: You are behind on business credit cards.
   → Next Step: Collections or a judgment.
   → Cause: Chronic cash flow issues.
   → Possible Consequence: Seizure of business assets, which can force you to shut down.

3. Situation: You committed fraud while getting a business loan.
   → Next Step: Investigation by law enforcement.
   → Cause: False or misleading information.
   → Possible Consequence: Criminal charges, which can lead to fines and possible prison time.

Use this chart to see how quickly things can escalate. When you see trouble, it is important to seek help.

Our Strategy for Defense

1. Gather Evidence That Shows Hardship
   We use bank statements, profit/loss reports, and other documents to show that your financial issues are genuine. This proof can persuade creditors to accept a settlement, which can give you lower monthly payments or a reduced principal amount.

2. Set Up a Payment Plan That Makes Sense
   We aim for monthly payments that do not choke your cash flow. This arrangement can help you stay in business instead of shutting down.

3. Prevent Lawsuits and Judgments
   If a lawsuit is already filed, we look for procedural errors or unfair terms. We may challenge the debt’s validity or the way the lender handled the claim. We also focus on preventing wage garnishments and asset freezes.

4. Protect Your Personal Assets
   We try to limit your personal liability. In some cases, we can argue that only the business should be responsible. This can help you avoid losing your home or personal bank account.

References to Government Agencies

• Federal Trade Commission (FTC) – Provides resources on consumer protection and debt relief tactics
• Consumer Financial Protection Bureau (CFPB) – Offers guidelines on fair debt collection practices
• U.S. Small Business Administration (SBA) – Helps small businesses with loans, counseling, and advice
• Department of Justice (DOJ) – Investigates and prosecutes federal crimes, including fraud

Consequences of Ignoring Your Debt

Any business owner who ignores debt might experience relentless collection calls, which can harm your reputation with suppliers. If a lender sues and wins, you could face a judgment, which might lead to post-judgment interest or bank levies. This outcome can destroy your credit, which can lock you out of future financing. Eventually, you might be forced to close your business.

Why Delancey Street is Different

We have extensive experience dealing with all types of unsecured business debt, from credit cards to merchant cash advances. When you call DelanceyStreet.com, you are reaching a team that wants to help you regain control. We focus on these goals:

• Reducing the total owed
• Getting lower interest rates
• Stretching out payment schedules

We also have a unique advantage: our ownership includes an attorney, Steven Raiser, ESQ, who can bring legal insight to our negotiations. We believe in open communication with your lenders, which can foster more cooperation.