Small Business Debt Relief Case Story: A Family Business Survives and Thrives Again
Peter Simpson (name has been changed to protect confidentiality), a small business owner, operates a business installing home theater systems in new home constructions. Peter, a husband and father of three kids, runs the business with his wife who works part-time doing the books for the business, but gets very little income. In his business Peter relies on vendors to provide materials on short-term credit, usually payable in 60 days. Business was going well for Peter until the Great Recession hit. Construction of new homes slowed dramatically and his business dried up.
Peter and his wife depleted their savings trying to get through this down time. They relied heavily on credit cards for both their personal and business expenses. Fortunately, they were able to survive the Great Recession, but found themselves deeply in debt. They had personal credit card debt, business credit card debt, and debts to the vendors that supplied materials.
All in, they owed more than $300,000. They were barely making the minimum monthly payments on all of this debt – approximately $9,000 per month.
Bankruptcy was not an option. Peter knew his vendors would not continue to supply him with materials with a bankruptcy on his credit. He consulted with a friend who handled bankruptcies to see if he had any other options. The bankruptcy attorney referred Peter to an attorney he knew who handled debt settlements. Peter met with the attorney and learned that through a negotiated debt settlement, he could settle not only his vendor debts, but also his personal and credit card debt.
The attorney estimated that the Simpsons could settle the entirety of their debts for about $165,000.00, including the attorney’s fees.
The attorney gave Peter and his wife their options. They could continue to pay the $9,000, but to a separate trust account where funds accumulate to settle the debt. At this pace they could have all their debts settled over a 19-month period. Alternatively, they could spread the payments out over a longer 36-month period with payments of approximately $4,600.
The Simpsons decided to spread out the payments over 36 months. They dedicated the other $4,400 no longer used to pay the minimum monthly payments to their retirement plan. At the end of the 36-month period, they became completely debt free. Through debt settlement, the Simpsons easily paid down their debt, stayed in good graces with their vendors, kept their business thriving and comfortably started funding their retirement.