Debt

Ask Jean: Settling Small Business Debt

Posted by Jean

My mom and I own a salon and day spa and like many businesses are having trouble paying off our credit card debt. We have several credit cards that we have made hardship payment arrangements with, but one of our cards was turned over to an attorney and the court awarded a judgment “by default.” What options, if any, do we have to settle this debt ($11,600), and can they garnish our business account to collect this debt? — Anonymous

The very first thing I want you to do is watch the Today Show segment that I did on this subject.  It’s not only happening to you.  It’s happening to many people — and many small business owners.

You should know you’re on the right track. Calling your creditors to notify them of your hardship (which, by the way, is a good word to use when talking to them), and providing them with a clear reason for why you’re behind is a good start, so you can negotiate down your debt and start to rebuild financially.

When it comes to that default judgment, I have some questions: Were you notified of the court date?  Were you, in other words, properly served?  That, unfortunately, is how a lot of these default judgments are coming down these days.  If you were not notified, you have the right to go back to whatever court handed down that judgment and fight back.

You may also want to get some help.  Gerri Detweiler of Credit.com suggests making an appointment – now – with a bankruptcy attorney. “I’m not suggesting you file for bankruptcy,” says Detweiler, since you might not need to at all, “but you do need to find out from the attorney what the creditor can do to collect on the judgment.”

One thing to know about judgment debts is that, like other debts, they can be negotiated. “It can be trickier once there is a judgment since the creditor has additional resources to collect,” says Detweiler, but an attorney can help you do so. Negotiated or not, however, you need to have the cash to settle the debt once and for all – which might be a struggle in your situation. “The fact that you have talked with an attorney and are considering going that route could give you some negotiating leverage with your creditors,” says Detweiler, “who would probably rather get something than nothing.”

So while it may seem a bit frightening, getting legal support is your best option. A lawyer can better explain the settlement options of your judgment debt, and what measures a creditor can take to get the money they’re owed. Depending on the state you’re in, that can include “garnishing wages, seizing bank accounts, and even placing a lein on your property,” warns Detweiler. By meeting with an attorney, you’ll know your specific risks – and they’ll likely have some good suggestions for how to handle the other debts you’re paying off already.