Maryland Business Debt Relief Lawyers: Navigating Legal Options for Struggling Companies
Running a business can be extremely rewarding, but it also comes with its fair share of challenges. One issue that many business owners eventually face is dealing with delinquent accounts and unpaid debts. While small debts may not be worth pursuing, larger unpaid invoices or commercial leases can seriously impact a company’s bottom line.If your Maryland business is struggling with debt collection, don’t panic. You have options. Hiring an experienced Maryland business debt relief attorney can help you navigate the legal system to recover what you’re owed. This guide will walk through some of the common debt relief solutions for Maryland businesses facing financial hardship.
Making Sense of Business Debt Collection Laws in Maryland
Debt collection laws can be tricky to navigate for business owners without legal expertise. Rules vary at the state and federal level, so it’s important to understand the specifics for Maryland.The Fair Debt Collection Practices Act (FDCPA) provides federal restrictions on third-party debt collectors. It aims to eliminate abusive collection tactics. However, the FDCPA doesn’t apply to original creditors collecting their own debts. That’s where Maryland state law comes in.Under Maryland statute Title 12, Subtitle 2, creditors collecting their own debts are also prohibited from harassing or abusive collection practices. Examples include repeated phone calls intended to annoy, obscene language, and threats of violence. Creditors can attempt to collect debts themselves, but must avoid illegal collection methods.For commercial debts, Maryland small claims courts can hear cases up to $5,000, while cases between $5,000-$30,000 go through district courts. Anything above $30,000 must be filed in circuit court. Businesses should consult with legal counsel to determine the best venue based on the amount owed.
-Hiring a Collection Agency vs. Debt Relief Lawyer
If your internal collection efforts fail, is it better to hire a collection agency or debt relief lawyer? There are pros and cons to each option.Collection agencies take a percentage cut of any debts successfully recovered. They tend to use aggressive tactics, like dunning letters and frequent phone calls. While sometimes effective, this risks violating collection laws if taken too far. And as the original creditor, your business could still be liable for any legal missteps.Debt relief lawyers take a different approach, leveraging their legal expertise to recover debts. A strongly worded demand letter on law firm letterhead can motivate many debtors to promptly pay up. For more stubborn cases, a lawyer can advise you on the next best steps, including negotiating payment plans or pursuing litigation. Lawyers charge hourly or flat fees rather than taking a cut of recovered debts.For large, complex debts a debt relief lawyer is often the safer route. Though pricier upfront, a lawyer allows you to avoid potential liability down the road. However, collection agencies may be a cost-effective option for smaller debts.
Alternatives to Debt Collection
If you want to avoid the hassle of debt collection entirely, a couple alternatives exist:
- Write off the debt as a loss: For very small debts, it simply may not be worth the effort and legal fees required to recover the money. Writing off the loss allows you to move on. Business debt write-offs can provide tax deductions as well.
- Settle for less than the full amount: Offering a one-time reduced settlement payment can be enticing for debtors. You recoup at least part of what you’re owed, while avoiding further collection efforts. Settlements may be a good route for long-overdue invoices you’ve struggled to collect on.
- File an insurance claim: If you have a business policy like accounts receivable insurance or commercial bad debt coverage, you may be able to file a claim for unpaid debts. Payouts from a successful claim can help offset the financial impact.
While less than ideal, these options provide an alternative way to mitigate losses from unpaid debts while avoiding potential legal hassles.
Using Bankruptcy to Address Business Debt
If your Maryland business is truly struggling with insurmountable debts, filing for bankruptcy protection may be the most viable solution. This allows you to restructure or discharge debts through the bankruptcy court system.Chapter 7 bankruptcy fully liquidates assets to pay off creditors, while Chapter 11 bankruptcy reorganizes debts under a court-approved repayment plan. Most businesses pursue Chapter 11 bankruptcy to continue operating.The bankruptcy process provides a number of helpful legal tools, including:
-- Obtaining debtor-in-possession (DIP) financing to fund operations during bankruptcy
- Rejecting or renegotiating burdensome contracts
- Selling assets to raise money for paying off debts
- Temporarily halting collections and lawsuits from creditors
While not ideal, Chapter 11 can help struggling businesses restructure debts and emerge in stronger financial shape. An experienced business bankruptcy lawyer can advise if this route makes sense for your situation.
Key Takeaways
- Understand federal and Maryland state laws related to business debt collection practices. Avoid illegal harassment and threats.
- Weigh the pros and cons of hiring a collection agency vs. debt relief lawyer for larger debts. Lawyers may be safer from a liability standpoint.
- Consider writing off small debts or negotiating one-time settlement payments as an alternative to formal collections.
- Filing for Chapter 11 bankruptcy protection could help restructure unmanageable business debts under court supervision.
- Partnering with an experienced Maryland business debt relief attorney can help you navigate this tricky landscape.
Running a Maryland business comes with enough challenges without having to worry about collecting unpaid debts. If your business is owed money, don’t go it alone. A knowledgeable debt relief lawyer can inform you of your options and help recover what you’re owed. With their guidance, you can resolve debt issues and get your business back on track for success.