What can I do about my company's debt that can't be paid?
The answer may depend on what type of business entity took out the loan and whether or not personal guarantees were signed at the time of the loan.
In most cases, a lender who is lending money to a small business will require one or more of the principals behind the company to personally guaranty re-payment of the loan. If that is the case, then when the company fails to make a payment, the lender will look to the guarantors personally for payment.
In order to force payment, the lender would have to bring a lawsuit against the company and/or its principals (owners). If the company was an LLC, the suit would mention the registered agent or managing members. If the company was a corporation, the suit would mention the President or other officers as well as the registered agent. If the company was a sole proprietorship, the suit would definitely mention the owner.
If the lender was successful in obtaining a judgment in the amount of the oustanding balance of the loan, plus fees, that judgment could be enforced against the defendants.
The typical methods employed in enforcing money judgments include:
"Voluntary" Compliance - Very often a judgment debtor will pay the money owed to a judgment creditor and thus satisfy the money judgment. If the judgment debtor does not pay, the judgment creditor should contact him/her and ask for payment. Sometimes a simple telephone call or a short letter yields results, sometimes a lien or execution is required.
Judgment Lien - A lien is a charge, security or encumbrance on a piece of property. A judgment creditor can place a lien on both the real and personal property of the judgment debtor. When property subject to a lien is sold, either a portion of the proceeds are used to satisfy the outstanding lien or the property is sold subject to the lien.
Execution and Levy- Execution of a money judgment is obtained through a legal process of enforcing the judgment by seizure and subsequent sale of the property owned by a judgment debtor.
Wage Garnishment - a form of execution and levy, a legal process of enforcing a money judgment by directing the employer of a judgment debtor to pay a portion (typically up to 25% for a money judgment or up to 50% pursuant to a order of payment of support) of wages earned by the judgment debtor directly to the judgment creditor.
When a judgment debtor refuses to pay a money judgment, a judgment creditor typically will proceed with both judgment liens and execution to enforce the judgment.
In New Mexico, a judgment may be enforced for up to 14 years.
It may be beneficial to you to consult with a local attorney or credit counselor who can assist you in attempting to negotiate with this creditor.