How to Get Out of Debt and Keep Clients and Friends

In these times of tight money, it's important to be able to get out of debt while keeping important relationships with clients and friends intact. Understanding your own immediate problems along with the financial pressures on the clients, friends or family members you owe money to is the key to improving your chances of staying in business and maintaining close personal ties. Here are some tips to help you to get out of debt and keep clients and friends.

Difficulty: Moderately Challenging

Instructions

1. 
    
   How much debt can you pay now?

   Do some financial analysis of your situation. What is critical to pay in full right now, and what can be paid in part? If your finances are stretched, chances are your lender is also tight on cash. What's the maximum amount you feel you are able to pay back right now...making it clear to your lenders that the rest is still owed and will be paid at a later date.

2. 
    
   Which clients are more important?

   Decide which of your lenders or clients you may be more important to. Business relationships and personal relationships both have value, but those with a greater dependence on you may be willing to be more flexible. Businesses for whom you represent a large percentage of their accounts receivable may be more receptive to a cooperative agreement to pay your debt.
   
   Much loved family or friends may also be able to offer a more flexible arrangement for you to pay back money owed and get out of debt. You will have a tougher time negotiating repayment of your debt with the people or companies who are not dependent on you for their financial welfare or happiness.

3. 
    
   Choose your negotiator.

   Decide who should negotiate. It's possible that the best person to approach the client you're dealing with isn't you. See if there might be another person who may have a good, close ongoing relationship with someone at the company, a liaison or sales person, your accountant, or a division or account manager, who can speak on your company's behalf.
   
   To get out of debt with a friend or family member, make sure you can approach the situation with as little emotional upset as possible. If you can't, try to find someone both of you trust to help you come to an agreement.

4. 
    
   Pay debts before they get too old.

   Pay debts before they get too old. If you're dealing with a company that is also experiencing financial problems or a slowdown in business, it's to the advantage of both you and the company to address debts sooner rather than later. The longer a debt goes unpaid, the more confrontational and less flexible your lender will become.
   
   With personal debts, it's too often the case that a debt gets forgotten or is later understood to be a gift, when that was not the original case at all, and that may cause irreparable harm to the relationship. It's always best to get a written agreement of a personal loan, and to make arrangements for repayment or a repayment schedule to start quickly.

5. 
    
   Work out a payment plan or other agreement.

   Figure out how flexible you can be. Instead of paying a debt in its entirety, you may be able to work out a payment plan with the company you're dealing, so you can honor your commitment. Understand they may need to protect their interests if the schedule is long term by requiring a small percentage surcharge for their patience and trouble. They may also require that any future work done by them be paid upfront, until your full debt is repaid. If they aren't as cash-strapped as you are, they may be able to accept goods, inventory or extra services in exchange for full or partial payment of the debt, if they can use them.
   
   You may want to consider a different way to pay back personal loans if your lender needs a valuable skill that you have, instead of the cash. Think about all the goods and services they pay for on a daily or monthly basis and see if you can get out of debt by working off or trading something to repay your debt.
   
   Even in good times, money can cause a lot of stress and upset in both business and personal relationships. But especially in financially troubled times, debt can accumulate suddenly and seem overwhelming. But being able to get out of debt and keep clients and friends is a valuable skill that will benefit you and your future.

Tips & Warnings

• Try to start as early as possible if you find you have to get out of debt and may have trouble doing it. The embarrassment of having to negotiate repayment terms is nothing compared to the pain of losing your business or the respect of your family and friends.
• Be wary of debt consolidation firms. Be sure to read all terms and contracts carefully.

[LisaBud]

on 6/9/2009 marlene16 - for answers to your specific questions you should consult a financial professional, which I am not. Thanks for reading, though.

[marlene16]

on 6/9/2009 Instead of a comment I have a question: what happen when you do a short sale without stop making your monthly mortgage payments? can you buy another property because you do not have late payments in your credit? and it is not damage?please let me knowthank you

[kaytay]

on 3/14/2009 excellent tips on getting out of debt and maintaining relationships

[goodselfme]

on 3/13/2009 Great tips. Getting out of debt can save so much each month. thank you for helping so many with this info.