Unfortunately, this does not fix the problem. If you do nothing to address the issue, rest assured telephone calls and letters will come. Such action will distract you from day-to-day matters. Eventually, this will end up in court!
This could quickly become your choice without action on your part. Responding to litigation results in legal fees, investigation, documentation assembly and once again time away from your business. This will not occur quickly. The courts are backlogged. It may take as long as one year for a judgment and you may lose in court (we have examples).
Should you elect not to respond to litigation, you may be liable for plaintiff attorney fees as well as the original debt plus interest accrued. In addition, you should expect liens placed against property or other assets as well as levies against bank accounts.
You will have unfavorable judgments on your record which impacts your credit score. Also, consider that lawsuits become a matter of public record.
Do it yourself (DIY)
Some businesses take a DIY approach. This is understandable given entrepreneurial bent of most company founders. You founded the business and handled other challenges so why not this one? The DIY approach might involve hiring an attorney to stall the lawsuit or perhaps have the attorney negotiate with the creditor. Creditors will not be favorably disposed to a debtor who hires a lawyer and yet is not willing to pay a debt. DIY may involve the business owner negotiating directly with the creditor. While both of these approaches may lead to a settlement, it will often be more costly. In some cases, these approaches could lead to the closure of the business. Here are three real-world examples.
Mediate and Acquire Capital
Creditors and their attorneys understand that simply winning a judgment is no guarantee of receiving payment particularly if it drives a business into bankruptcy. The goal is to stay out of the legal system. Using a third party such as an expert in financing and debt mediation to represent you allows the following to occur:
- Alleviate an emotional situation through the introduction of an objective third party.
- Arrange a measurable debt reduction plan with the creditor.
- Acquire capital to implement debt reduction plan.
- Focus on keeping your business viable.
- Keep information out of the public domain.