While personal debt is all too easy to accrue, it is often more expected that we will take on debt in business—especially at the beginning as we need capital and financial flexibility to get started. For most, starting a business means taking risk. And while it may seem like the odds are against so many who bravely follow their dreams and open restaurants, online businesses, local customer services, and so much more, many do succeed despite fragile financial beginnings.
Business Credit-Card Debt May Become a Problem
Credit card debt can be a larger issue for businesses though, literally, as the balances allowed may be higher, and owners may find themselves charging orders for supplies and inventory regularly. If such balances are not paid off with discipline each month, challenges could lie ahead—and especially if there is not a consistent, positive cash flow in place. If you are a business owner experiencing financial difficulty, you may find that credit-card payments (or perhaps payments on another unsecured loan) were late once or twice and then the debts began to escalate as late charges accrued and minimum payments rose substantially if you were not able to pay off balances each month. There is nothing worse than receiving an ongoing litany of phone calls from strangers, in the irritating form of creditors and debt collectors if your accounts have gone delinquent. This process can be even more annoying as the laws for ‘harassment’ on business accounts are much laxer than that of personal debts. Letters may begin arriving too, one after the other with that pink ‘account overdue’ stamp, and you may finally become so overwhelmed that you begin ignoring the communications altogether, and putting business matters out of your mind each day when you go home.
That Creditor Lawsuit May Turn into a Default Judgment Against Your Business
If you became so desensitized to ongoing threats that you either did not realize you were being sued (and believe it or not, that does happen all too often) or just ignored the documents once they were served on you, it is possible that a lawsuit and the court process may have proceeded without you, resulting in a default (or court) judgment. At this point, if you have anything the creditor would find worth taking, it is important to consult with an experienced business attorney like Shane Coons as soon as possible to discuss your options.
The Consequences of a Default Judgment Should Not Be Taken Lightly
The repercussions of having a judgment granted against your business can be very serious. If you are listed as an employee of your corporation, your wages could be garnished, meaning that the creditor (now acting as a secured entity) can take up to 25 percent of your wages to satisfy the debt. They also have the right to freeze your checking or savings accounts for the business, which could get very tricky if you are trying to pay suppliers and vendors. The process gets even trickier if they seize property. Speak with your attorney about the possibility of having the judgment dismissed through a motion to vacate, or the possibility of negotiating with the creditor. Even at such a late hour and with the leverage of a default judgment granted against you, it is very likely the creditor may still be willing to have the debt satisfied at a discounted rate if you agree to pay a lump sum. They may even agree to monthly payments.
Do you need help with a legal issue regarding your business or the workplace? Call Shane Coons now at 949-333-0900 or email us at Shane.Coons@seclawoffices.com. We can review your case, answer your questions, and help you decide how to move forward. We are here to help!