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In 2016, I made a series of hasty startup decisions to put large business purchases on my personal credit cards - that's around 80% of my current $150k in open credit card debt.

For the most part, needing to meet with potential cofounders, investors, while building the entire thing myself took up most if not all of my time. I've hastily incorporated a 1-person Delaware C Corp in 2015 though did not have time to look into setting up a separate bank account. To be honest, much of what I did should probably have been done while being employed as a research engineer/scientist at a big company - but having won a few key awards, I naively set out to try my own startup.

I'm able to justify the big expenses as legitimate business expenses. I've been very hasty on tax forms the past few years and just added them to the Schedule C. (The complication is that these were purchased on credit card.)

I'm trying to evaluate my options currently:

  1. I'm considering just joining a big company as a employee. Sadly, the primary reason for this would be to pay off business debt over time. (And I would be worried that I would no be able to afford to pay taxes next year if I tried paying my debt off the first year.)
  2. There's considerable (or at least high potential) value in the technology I have created. I'm considering re-incorporating as one or more new entities - this time with better understanding of how business works. Each new entity would take on part of the debt.

My question: What would be the best way to deal with high credit card debt incurred for a business you tried to start, but did not exactly succeed in?

(Note - For the most part, albeit not employed by the usual large company, I'm a very frugal person - I usually break even or profit slightly on personal expenses: get travel covered to speak as a specialist at a conference, stay for free among Esperantists and friends, etc., or burn hotel points - which I accumulate from travel covered as contractor when I'm building technology for industry events. Also, a keen travel hacker, having done the whole credit card benefits thing moderately, back when I still had good credit.)

  • How would "each entity take on part of the debt"? Is there a bank that would be willing to loan that new entity money that could flow to you in order to pay off your personal debt? That seems highly unlikely for an entity without a track record of profitability where the loan would just be used to pay off your personal credit card debt. Barring that, your question seems to boil down to a generic "how do I deal with personal debt" where increasing your income and putting as much as you can toward the debt until it's paid off is the generic answer. – Justin Cave Feb 14 at 23:27
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A common behavior, in those with crippling debt, is to justify the decisions they made at the time. "They needed a new car", etc... Among those excuses is a failed business. Smart, mathematically inclined, people go crazy when myself and others talk about the "debt snowball method" of paying off debt preferring paying off high interest credit cards first. The key benefit of the snowball method is it addresses behavioral issues that are not addressed by the highest interest first method allowing it to outperform despite the "inefficiency".

I'm a very frugal person

[x] False. You are not a frugal person, and believing so is unrealistic. You spent 150K on credit cards without much pause and presumably little or no income. Justifying these expenses as worthwhile represents a disconnection from reality.

I'm considering just joining a big company as a employee.

You better, I mean what else are you going to do for money? How else can you make the payments on 150K of credit card debt? How are you going to eat and live? You should take a job because you are broke.

So go to work at a big company, and start delivering pizzas on the side to earn extra cash (or some other side hustle).

Follow the baby steps:

1) Put retirement savings on hold 2) Get on a written budget, reduce expenses as much as possible 3) Save 1,000 as a starter emergency fund 4) Pay off your debts smallest to largest.

How long will that take? If you are aggressive and really lean in perhaps 2-3 years?

For more information on why you should pay your debts smallest to largest, see here: Why would anyone want to pay off their debts in a way other than "highest interest" first?

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I suppose that the personal credit card debt on behalf of the company is just paid-in capital to the company. For the personal debt to be recognized as debt of the company would probably require the help of a lawyer and probably wouldn't work if the company couldn't have qualified for the debt on its own.

The way to deal with the credit card debt is either bankruptcy or a loan at a reasonable interest rate to pay off the credit cards. For instance a home equity loan would be a relatively good interest rate.

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