How to Survive Judgments, Tax Liens and Lawsuits (Part 3 of 4) 

In Part 2, we talked about the importance of incorporating and protecting yourself through proper structure and secured lending. But incorporation is only one layer of defense. Another key to surviving judgments, tax liens, and lawsuits is knowing how to work with secured creditors, especially your bank. Many business owners see the bank as the enemy, but in reality, a strong relationship with your lender can be one of your greatest shields against outside threats.

If you have a bank or other secured party, stay close to them.  You might see them as the enemy, but in fact they can help you protect your business assets through their secured position.  Even if they are owed more than the assets are worth, this would only add to their cooperative posture.  They actually want to see you succeed and be healthy since this is when they can also make money.  With the bank having tied up all your assets as security, there is no leverage left for the rest of the creditors.  Under these circumstances they even come ahead of the IRS or State taxing bodies.  This can change after a lien is filed and recorded, but even then, the bank could move before the taxing bodies could do any damage. 

Since accounts receivable can be attached, discounting for collection and shorter terms can help reduce exposure.  Also, if your bank has ALL of your assets secured, that would account for receivables which insulates them from other creditors including taxing authorities.  

The advantage the tax authorities have is that in many instances they can also chase the responsible party (you) personally as well.  Again however, if you have no assets it becomes another negotiation.  Arrangements can be made for payments over time or settlements for pennies on the dollar if you are positioned properly.  

At the end of the day, survival comes down to positioning—knowing which creditors have leverage, which ones don’t, and how to align yourself with those who can actually help you protect your business. The good news is you don’t have to face judgments, liens, or lawsuits alone. By taking the right steps now, you can negotiate from strength instead of fear.

If you missed Part 1 or Part 2, be sure to go back and catch up and stay tuned for Part 4, where we’ll share additional strategies to keep your assets safe and your business moving forward.