What Are the Different Types of Corporate Debt Relief?

Geri Terzo
Geri Terzo
Businesswoman talking on a mobile phone
Businesswoman talking on a mobile phone

Corporate debt relief is very likely to involve a client and the participation of some third party, such as a credit counselor, attorney or investment banker. Depending on the type of relief sought, the solutions are likely to differ. A counselor, for instance, might help a corporate client continue negotiating with creditors without filing for bankruptcy. An attorney, on the other hand, might be involved when a bankruptcy protection filing is the best solution. Investment banks can offer corporate debt relief to qualifying clients in the form of corporate finance, which could lead to the sale of certain assets to generate cash.

Credit counselors can help clients come up with a corporate debt relief program that allows the business to maintain supplier and vendor agreements and protect assets. For instance, if a business is unable to honor financial obligations, it's possible under certain conditions for creditors to attempt to gain access to a business owner's personal items. A counseling professional could negotiate with creditors on behalf of clients to avoid this from happening and instead create reasonable repayment terms for the debtors. The result could be a greater amount of time for a corporation to service debts at potentially better rates for the debtor. If a corporation becomes delinquent on federal taxes owed, a government agency might agree to some repayment schedule so that the entire debt doesn't need to be paid at once.

A financial reorganization might be necessary to create corporate debt relief. In this process, debts might be consolidated, or the terms of any arrangements might be altered. If creditors are not cooperative and a business cannot find any relief otherwise, a bankruptcy filing might be needed.

Bankruptcy might seem extreme, but it can provide some protection to debtors while these business owners attempt to regain profitability. This form of corporate debt relief might eliminate contentious communication and unwanted inquiries by creditors because of the involvement of a bankruptcy judge. Attorneys and investment bankers can advise corporate clients throughout this process so that debt is restructured in such a way that the business can continue to operate throughout the bankruptcy and eventually become solvent.

Selling any non-core business assets might be a way to generate some much-needed capital and avoid a bankruptcy filing. Market conditions must be conducive to avoid selling these items for less than they are worth. Investment bankers offer these services and can advise a business through an asset sale, after which any profits can be directed toward debt relief.

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