When Your Business Debtor is Failing

 Posted on September 09,2024 in Debt Collection

As a lender, it is best to be aware of how your business debtors are doing. Most new businesses rely on loans to cover startup costs, and unfortunately, quite a few will fail within the first year. Even longstanding businesses may rely on loans to expand. If a small to mid-size business you have loaned money to is failing, you may have a limited time to act before the business goes under and your hopes of being repaid drop precipitously. When you become aware that one of your business debtors is struggling to stay open amidst financial difficulties, there are steps you can take now to increase your chances of collecting on that debt. Before you act, it would be wise to consult an experienced Chicago, IL debt collection attorney.

When to Consider Repossessing Commercial Assets

If the business has fallen far behind on its payments, and the loan is secured by business capital, you may be able to use repossession to avoid losing your investment. You may want to first consider what the chances are that the business will recover and catch up on overdue payments. If the business has been operating for quite a while and has a reasonable explanation for a current financial setback, you may instead want to give the business time to start making payments again. However, if the company looks to be on the brink of collapse, it may make more sense to proceed with repossession.

When Your Business Debtor is Likely to File Bankruptcy

If you suspect that the business you have loaned money to is going to close its doors, there is a high likelihood that it will file Chapter 7 bankruptcy. If your debtor does this, you are unlikely to be repaid in full. Once the company’s assets have been liquidated, the proceeds will be split between you and its other creditors. If the business is carrying significant debt, your portion may be far less than what the business owes you. Even if you are the business’s only creditor, be aware that the company may not be worth as much as it currently owes.

You will need to take action promptly to maximize your recovery before the business files for bankruptcy, as once bankruptcy is declared, all collection efforts must cease. This could mean anything from filing a lawsuit now to working with the business to see if it is salvageable.

Contact a Chicago, IL Commercial Debts Lawyer 

Dimand Walinski Law Offices, P.C. has been helping commercial lenders collect on debts for over 40 years. Our experienced Cook County, IL commercial debt collection attorneys will work to maximize the amount you can recover from a failing business. Contact us at 312-704-0771 for a confidential consultation with a knowledgeable attorney.