Debt Consolidation

December 17, 2021 By Joanne Bella

5 Ways Small Businesses Can Recoup Pandemic Losses

The COVID-19 pandemic has had huge impacts on businesses big and small. According to research conducted by Yelp, 60% of businesses have permanently closed as a result of the global pandemic, and more are still struggling to recover.

It can be hard for a business to pick itself back up after huge losses, but it’s not impossible. Here are five ways small businesses can recoup pandemic losses.

1. Review your business plan

Your business plan may have been designed to suit the conditions before the pandemic began, but we live in a different environment now. A review and revision of your business plan may be necessary.

For example, if you own a restaurant and have never had an online presence, you should consider setting aside funds for building a website that can take orders and offer delivery. This, and many other simple modifications, could ensure the continuity of your income despite the pandemic, thus helping your business recover sooner from its losses.

2. Evaluate your financial losses

Research has found that cash flow was the biggest problem for small and micro-enterprises during the pandemic. Proper cash flow management and assessment is key to mapping a recovery plan.

You can start with a detailed study of your cash flow — profit and losses — including records of all transactions, purchases, returns, inventory, rent, salaries, and so on. This will help you keep your eye on the goal to recovery, manage your finances carefully to make up for lost revenue and spend reserves wisely.

3. Hire freelance finance professionals

Many business owners might be hesitant about the cost of hiring professional accountants to help them sort out their finances. However, this is one case where the costs are worth it — and in fact, might not even be too expensive. Antenna founder Brendon Schrader notes that hiring a freelancer allows a small business to find targeted and better qualified talent to address their needs at a much lower rate.

Universities offer courses on finance and business administration online, and this has allowed more people to get the necessary training and qualifications to practice freelance accounting. With proper accounting, this will help you assess how to recover from your losses more accurately.

4. Plan your business expenses in advance

Small business owners need to plan in advance where limited funds will go next and how much can be allocated for certain business needs. Distribute a portion of the funds to go back into the business for capital expenditures, costs to restock inventory, expenses for planned maintenance, salaries, and maybe even funds toward an emergency reserve account for sustaining business operation — just in case another coronavirus variant develops. Planning expenses in advance can help you predict how soon you should be able to regain lost income, and whether full recovery is possible.

5. File for bankruptcy

Bankruptcy isn’t the only method to fix debt, but if you owe a lot of creditors, it’s often the most expedient way. As extreme as it sounds, bankruptcy offers a few benefits to belabored business owners. It can help your credit score go up, and the consolidation of debt can also be helpful. However, declaring bankruptcy and opting for consolidation isn’t a magic bullet, and can come with its own challenges. You can schedule an appointment and consult with us before opting for this route, and we’ll help you determine whether filing for bankruptcy is the best course of action for your business.

Everything in this life comes in cycles. With the worst of the pandemic behind us, it’s high time businesses started thinking about ways forward. The world has started to adapt to the new normal, and with careful work and recovery planning your business may be able to do the same.

Post solely for the use of jenleelaw.com

By Joanne Bella

This is just a basic overview and is not legal advice specific to your situation. If you have questions about your rights when it comes to debt and credit, you should speak with an attorney in your area for legal advice. If you live in California or North Dakota and would like to speak with Jen Lee Law regarding your situation, please schedule an appointment.

October 5, 2021 By Jen Lee

And the lesson is…

And the lesson is…don’t take financial advice from a fashion magazine?

If you have followed me at all, you may notice that I tend to read a lot and like to write or do videos about the bad information I find on the internet. So, here we go.

An article titled, “6 Important Things to Consider Before Filing for Bankruptcy” sounds like it would be right up my alley. Let’s take a look.

#1 – It Affects Your Credit.

Great. That statement is true. However, the explanation that followed got it wrong. The article states that it will affect your credit negatively and will be “significant and swift.” If you already have bad credit, filing bankruptcy makes your score go up. Read that again.

It gets worse. The article then says you are “required by future employers to know of your bankruptcy status.” First of all, that statement doesn’t even make sense. Second, it totally depends on the state you are in, the application, and the type of job you are applying for at the time. Finally, most employers prefer that you not have overwhelming debt distracting you from your job. In fact, qualifying for a job based on credit is often resolved through a bankruptcy filing because now the problem debts have been handled.

#3 (but actually #2) – Different Types of Bankruptcy.

Starts out ok. There are two main types of bankruptcy for consumers, Chapter 7 and Chapter 13. Then, it goes downhill fast. “You will need to sell off non-exempt assets, though, to pay off your debtors.” Where should I start?

First, you don’t sell off non-exempt assets. A Chapter 7 Trustee is assigned to your case when you file and they are the ones who would be responsible for selling non-exempt assets.

Second, YOU are the debtor. You are attempting to deal with your creditors. So, selling your non-exempt assets to pay your debtors makes absolutely no sense. The person who files bankruptcy is a debtor, the people and companies you owe money to are creditors.

Third, most Chapter 7 cases do not involve the sale of assets. An attorney can advise you on assets that may be at risk and often, a different chapter of bankruptcy is selected if there are assets you want to protect from sale.

#3 (the second #3 on the list) – Not All Debts Will Be Wiped Out.

True statement, but the rest is wrong. Yes, child support is not discharged in bankruptcy. However, taxes are often discharged in bankruptcy. Student loans are an interesting area because some can be discharged, but a lot cannot be at this time.

The second paragraph talks about creditors being able to challenge the debt you are discharging and that the court can rule in their favor so that the debt is not discharged. This is extremely rare and it’s usually when some sort of fraud or intentional misrepresentation is involved. This is not your average credit card debt that most people discharge in a Chapter 7.

#4 – It Isn’t a Quick Fix.

Not sure anyone thinks bankruptcy is a quick fix, but it’s often the most efficient fix. This section also talks again about losing assets. Luckily, it does say to talk to a lawyer to make the right decision, which is excellent advice.

#5 – Your Income Matters.

Hmmm. Yes, your income matters when determining if you are able to come up with a plan to pay off debt, whether that’s in bankruptcy or not. Your income matters if you are trying to qualify for Chapter 7 and have consumer debts. Your income comes into play in a Chapter 13 when we determine how much you have to pay towards debt. But the last sentence, “The more you make, the better off you will be in bankruptcy…” is wrong. Timing of the bankruptcy filing when you have lower income can help qualify for Chapter 7 or have a lower payment in Chapter 13. Talk to a lawyer, please.

#6 – There Are Other Ways.

Of course there are. But, which way is best for you and your goals? Because negotiating with 10 creditors and keeping track of 10 payment plans may be more stress than it is worth. Consolidation can also be helpful, but can also negatively affect your credit score. There are also a lot of companies out there willing to take a lot of your money to put you in a debt settlement program, which is actually worse on your credit than bankruptcy. But, no one tells you about that feature.

I promise to get off my soapbox now. Here’s the link to the article.

April 19, 2019 By Jen Lee

I didn’t know! I didn’t know you could help me!

I wish I had a dollar for every time this phrase was uttered in my office (or at a speaking engagement). I keep talking, speaking, writing, and creating videos because I hear over and over from my clients that they wish they had known that someone could help them a long time ago. After a very busy week, here are some of the things people didn’t know:

Student loan consolidation can help get a student loan out of default and back on track with income-based repayment (referring to federal student loans).
You can get a mortgage while in Chapter 13 bankruptcy.
Filing bankruptcy may make your credit score go up.
Taxes are often effectively dealt with in bankruptcy.
You would get sued when you signed up with a debt settlement company.
Your credit score would drop with just one missed payment.
Your wages could be garnished for your spouse’s debts from prior to marriage if you don’t do something to protect yourself.
Chapter 7 is not a good option if you have assets you want to keep, unless you have a plan.
Adding an authorized user to your credit card may make their score go down.

The reason I list all of these things out and talk about pretty similar things every week is because so many people don’t know that there are often solutions available for their situations. We almost always hear from people in our office that they felt they were the only ones with these types of problems and didn’t know that a majority of Americans have a debt or credit problem of some sort that they really could use help with solving.

Google is an awesome tool, but I find that so many people find bad information or don’t know to keep digging for more details on their individual situation. Very rarely do I recommend the exact same thing for each of our clients. Every case has a different detail that makes certain options better than others.

So, you may not know everything right now, but there are options for you if you ask!

February 21, 2019 By Jen Lee

5 Reasons to Know Your Rights and Options Before Saying, “I Do!”

When you hear prenuptial agreement, you probably think about the rich and famous protecting their assets from a future spouse that the family may not approve of (either silently or very loudly). However, there are many reasons that everyday people should understand how their future spouse’s debt and credit can impact their lives, especially in a community property state like California.

Avoid fights about finances in the future.
The number one cause of break-ups and divorce is financial or money issues. So, talking about finances, expectations, and the future is very helpful in avoiding problems down the road. Talk about how bank accounts will work in the relationship, how major purchases will be decided on, what you want to save for, what things are important to you on a regular basis.
Know what you are getting in to when it comes to major milestone purchases.
Understand how your spouse’s credit score may impact buying a house, a car, or qualifying for other major purchases. Contrary to what a lot of people believe, your credit scores are not merged together when you get married. You each have an individual credit score, but some lenders will use both of your scores to determine your interest rate and terms, especially mortgage lenders.
Know what you are liable for (even if the debt is before the marriage).
Paying for your spouse’s debts. Do you think that debts from prior to the marriage aren’t your problem? Not only does it add stress to the relationship, but technically, your wages (community property) can be garnished for your spouse’s premarital debts, including student loans. See #4.
Avoid pitfalls with student loans, repayment, and collection.
Student loans are a huge problem for many couples. If you are on income-based repayment for your student loans, have you figured out what getting married does to that calculation when your spouse’s income is included? This is often a very big issue for our clients and one to think about how to deal with before it becomes a problem.
Good planning for things that may (or may not) go wrong.
Finally, joint debts acquired during the marriage are not just split 50/50. Both of you are liable for the full amount and this often creates problems during a divorce case because the creditors do not have to abide by the family court division of debt. So, we often see one spouse assigned to pay a debt who doesn’t pay it, which then causes problems for the other spouse when the creditor sues him or her.

Remember, the elephant in every room is that people do not like talking about debt and credit problems. When you are joining your life with someone else’s, it is very important to understand your rights and options for the future. Jen Lee Law, Inc. offers a Premarital Debt Strategy Session to help couples figure out potential issues and get the marriage off on the right foot. Click here to schedule your Premarital Debt Strategy Session.

February 15, 2019 By Jen Lee

My Loan is Secured by What??

We often talk to clients with business loans. Or, clients who bought their business from someone else and are making monthly payments to the seller. The problem with many of the loans or purchase agreements is that no one seems to know exactly what secures the debt.

For example, a recent business loan stated that the loan was secured by all of the assets of the business. Well, at the time the loan was taken out, there actually were no assets of the business. It was brand new. The agreement was vague and there were also none of the required filings done to actually secure the debt.

In another case, the buyer and seller agreed to a purchase price and that the debt would be paid over four years. A couple of years in, the buyer figures out that new business is really losing money and she cannot afford to keep up with those payments. The problem is that the purchase agreement has no details on what the assets of the business were at the time of sale, just that the debt is “secured by the assets of the business.”

There are a couple of main points to take away when you are thinking about buying, selling, or financing based on assets:

Make sure you follow the law on how to actually secure a debt.

This likely involves talking to a business attorney to follow the right formalities. Yes, it will likely cost you some in attorney fees up front, but far less than when the deal goes south and you are now paying an attorney at an hourly rate to try to squeeze money out of the other side…and it’s quite possible the other side doesn’t have any money anyway.

Avoid vague agreements.

If the agreement is secured by all assets of the business, then you should know and have a list of what those assets are. Both sides want to point to the other side when a vague agreement ends up in trouble, like in bankruptcy court. The seller saying things like, “well, the buyer should know what assets were there when she bought it” and the buyer saying, “I don’t know exactly what was here and what I bought later…” often just costs both sides a lot of time and money that they don’t have.

Find out how things should be done correctly before there is a problem. You’ll be glad that you took the time and paid the small fee up front instead of big litigation costs later. If you need a referral to a local business attorney in California, please contact us and we’ll be happy to recommend several.