No statute sets how long business debt settlement takes, and no public dataset measures it. What we can look at is the legal clock for each type of debt, which varies from days for MCA debt to months for SBA debt. Your debt settlement program will take as long as the longest of those clocks.
How long does it take to negotiate business debt settlement for a mixture of vendor, credit card, equipment and SBA debt?
How long does business debt settlement take for each type of debt?
| Debt type | Clock that sets the pace | Source |
|---|
| Merchant cash advance | Enforcement can begin within days of a missed remittance | See the MCA timeline guide linked below |
| Equipment financing | Sale notice sent 10 or more days before disposition is timely in a business deal | UCC 9-612(b) |
| Bank cards and lines | Retail credit charged off at 180 days past due (open end) or 120 days (closed end) | OCC Bulletin 2000-20 |
| SBA loans held by the government | Reported for offset after 120 days; transferred to Treasury at 180 days | 31 USC 3716 and 31 USC 3711(g) |
| Vendor and trade debt | Four-year limit on sale-of-goods claims, which a contract can shorten to one year | UCC 2-725(1) |
The OCC rule does not state if small business cards are retail credit, and a charge-off doesn't forgive the debt; you still owe the money.
How long does a business debt settlement program take?
It takes as long as the longest file takes to settle and as long as it takes to save the lump sum or fund the installment plan. The time it takes is equal to the amount you want to settle divided by the amount you save per month.
If you owe $150,000 to a vendor, a business credit card and an equipment deficiency, and an illustrative settlement target is 50%, it would take twelve and a half months to save the $75,000 at $6,000 per month before you can make the final payment. While you save, you're not paying the bills, and the CFPB notes that late fees and penalty interest accrue.
It takes longer if a charged-off card is sold or a vendor sends the file to a collection agency, because you start negotiations over with a new entity. A lawsuit may shorten things, because you must answer the complaint or the creditor gets a default judgment and levies on your assets.
How long does it take to settle an SBA loan?
Settlement of SBA debt usually takes the longest of any debt settlement. If a 7(a) loan is still with the lender, the lender cannot compromise principal without the SBA's prior written consent under 13 CFR 120.536(a)(3). The regulation does not specify a time limit for the SBA to give consent.
Once the loan becomes a federal debt, federal law applies. The Treasury Department says that federal agencies generally refer the debt for cross-servicing when it is between 60 and 180 days delinquent. Treasury can then send demand letters, use private collection agencies, offset federal and state payments and refer the debt to the Department of Justice. An agency has the authority to compromise federal debt up to $100,000, not including interest. Anything larger needs Department of Justice approval.
The SBA will consider an offer in compromise on Form 1150 only after all collateral has been liquidated. The SBA does not allow an offer in compromise to forgive COVID EIDL loans. If you agree to pay a compromise in installments, 31 CFR 902.2 requires the entire debt to come back if you default.
Can you settle equipment debt, and when?
Timing depends on whether the equipment has been repossessed. If it has, the debtor may negotiate the deficiency owed to the lender under UCC 9-615(d). That deficiency is not unlike a vendor debt, since no assets secure it.
How quickly do vendor and credit card debts settle?
Vendor debt is often the first debt that can be settled. Often only one person needs to agree, and that person may want to keep doing business with the debtor. There are no statutory waiting periods, as collection activity law (the FDCPA) only applies to personal, family, or household debt. Likewise, Regulation Z excludes credit which is extended primarily for business purposes.
One word of caution: under UCC 3-311, simply mailing a check marked "paid in full" is not enough. The statement must be "conspicuous," and the vendor still has the option of repaying the amount within 90 days to "undo" the settlement. It is always best to have a signed writing in place.
How is MCA debt settlement different?
MCA debt runs on the shortest clock of all business debts. MCA funders will take action against a debtor's accounts within days of a remittance not being made. That's why MCA debts are usually handled first. See how long MCA debt settlement takes by stack size and funder type, and how MCA debt settlement works step by step.
Is the program over once you sign the settlement agreement?
Not quite. For a secured debt, the secured party is required to file a UCC-3 termination statement within 20 days of written demand from the debtor under UCC 9-513(c). If a personal guarantee was signed, you'll want it released in writing. Finally, debt forgiveness can count as income to the debtor, and a 1099-C may be filed. See IRS Pub 4681.
Frequently Asked Questions
Why do some companies quote 24 to 48 months for business debt settlement?
That time period comes from consumer debt, mostly credit cards. The consumer puts money into a deposit account every month, and the debts are settled one at a time. That may work for a consumer, but business debt creditors will file a lawsuit, repossess the assets, or turn the debt over to the Treasury long before 24 months have passed.
Does a credit card charge-off mean the business debt is gone?
"Charge off" simply means the debt has been charged off the books of the creditor, usually a bank. It does not mean the debt is gone. The debt is often turned over to a collection agency or sold. If you signed a personal guarantee, you will be held responsible for the debt until it is settled.
Does stopping payments make business debt settlement go faster?
The Consumer Financial Protection Bureau warns that stopping payments on your debt to make debt settlement a possibility will result in late fees, possible penalty interest, and more vigorous collection efforts by your creditors.
Is Subchapter V bankruptcy faster than settling business debt?
Subchapter V requires the debtor to file a plan within 90 days, but the plan can last 3 to 5 years. Additionally, the debtor can only have up to $3,424,000 in debt if the case was filed on or after June 21, 2024.