Expert: Christine Janklow - 10/1/2008

Question
HI Christine,
I opened a small Pilates (exercise) studio in the summer of 2006.  I had a
great 1.5 years, and the economy in the last 6 months, plus clients with
personal illnesses that were long time clients, has killed the business -
basically down 75% from last year at this time.
My fiance wants us to move to Los Angeles, and he has a great offer there.  I
took out a small personal loan so I could "REFI" the biz debt, but the biz debt
does not appear on my PERSONAL credit report.  I am wondering if I settle
the business debt, will that settlement appear on my personal report?  The
debt is unsecured as lines of credit.  
I have never defaulted or been charged off on any personal loans, i am not in
default on the business cards, but I will be here shortly if I don't refi on my
personal credit.  I am current and on time but I have had a mediocre
relationship with this creditor at best.  Frankly, I dont want to refi this on my
personal credit, but I will be using this personal loan to try to settle, which I
have no idea how to do.  Any advice on the first steps of business card
settlement?  Will my personal credit take a hit?  Should I wait to try to settle
until the financial situation on wall street settles down, or wait till I am in
default?
Any options you can provide would be appreciated.
Best regards,
M

Answer
Mickey:
Thank you for your question. Like many small business owners you are between the proverbial "rock and hard place". In this economy and given your situation where you are lacking predictable or future income, you need to forget about personal credit worthiness for now. Your credit score is reperable if it takes a hit. Taking a loan to "consolidate or settle" debt (if you can even get one) will create future indebtedness and you will have an obligation to pay that one down in years to come. If you have some remaining income and simply need to settle out what is owed, I don't recommend you do this alone. I have been in debt settlement for several years and it is torturous to deal with banks and creditors when you don't know what or how to ask for as debt relief. As for taking that loan to settle, just know that creditors won't settle on current debt, you must be in default for them to even consider a discount and then you must detach from the outcome of "how good a discount" you might be able to get them to accept. Warning; if you do it wrong, they might simply apply your "settlement" as a payment on full balance and then you are out the money and still in debt.

If you are serious about exploring the option of settlement, I welcome the opportunity to speak confidentially with you about your situation (no cost or obligation)and let you know what your options really are. Feel free to e-mail me directly and we can set up a call chris@settlesource.net.

Respectfully,
Christine Janklow