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Ask HN: My startup failed. $9k in debt and need to pay most of it in 12 days.

• mortenjorck 16y ago
  The other comments here will help you much more in the immediate timeframe, but here's my suggestion for after this is all over: Write. Nothing will give you catharsis and perspective on this unpleasant experience like writing. Consider sharing your experience with the community; your lessons learned may end up saving someone else from a similar situation, and while learning from a failure is great, teaching from a failure is even better.
• SHOwnsYou 16y ago
  Have you called who ever is taking your account to collections and tried to negotiate more time or a payment plan? Explain that sending it to collections is bad for you and them. If you don't have the money, then you don't have the money. But if also have to deal with a collection agency then you'll have more stress to deal with. Also the collection agency gets a cut of your (current non-existent) money owed. If you can explain that is in both parties interest to keep it out of collections and extend the deadline or work out a payment plan, you may be more likely to get out of this situation without damaging effects on your credit.
  • debtscrewed 16y ago
    Thank you for your suggestion. The only reason I wouldn't do that is because Rackspace was very adamant about even the extension of the deadline (they would only agree to a 5-day extension). But it doesn't hurt to ask, though it may create a strained relationship between us.
    • Grinnmarr 16y ago
      It's their job to try and collect as much as they can. Even if your contact is friendly and sympathetic, if they think you can pay on better terms than you offer they will hammer you. On the flip side it is your job to be honest about your situation and get them to accept terms that you can actually meet. Other people have given better and more specific advice but the bottom line is they will take what they can get. No hard feelings. Business is business.
    • pragmatic 16y ago
      I worked as a collector at one point. You have incentives to get money collected. A collector will say everything they can to get you to pay (sometimes skirting the collection laws). They know that you have a limited amount of money and the chance you actually paying decreases as time goes by.
• swombat 16y ago
  Is this a limited company? Seems pretty fucked. I don't know what the usual legal proceedings are to declare bankruptcy, but this is why they have bankruptcy laws and limited company. Speak to a bankruptcy lawyer. Presumably all of this is your company's debt, not your own personally, and you have not committed fraud or done anything illegal, so hopefully you're in the clear personally. It may even work out that your cofounder is the one who ends up with a black eye on his credit record if he's the majority shareholder and ends up being the person named in the bankruptcy. You haven't specified what country you're in. I'm guessing US. From the little I know, bankruptcy protections are pretty great over there. In the UK, if you take a company that you're a director of bankrupt, you aren't allowed to be director of another company for 5 years.
  • debtscrewed 16y ago
    It is a limited company, and it's registered under a Delaware C-Corp. I'm not familiar with the details of bankruptcy either. Will this damage my name and the name of the company? Well, I'll probably be the guy named in bankruptcy, since my cofounder is in the UK. Yes, I am in the US. Ouch, that sucks, see directly above.
    • rwhitman 16y ago
      You should edit your post if you can to mention that its a C-Corp. From what I know the C-Corp should be protecting you from personal liability, but I'm sure other commenters here have more expertise
      • enjo 16y ago
        Just for reference: The C-Corp does provide a pretty heavy liability shield. However, alot of these contracts where likely personally guaranteed. It's nearly impossible to open a merchant account for a young company without personal guarantees from the principles. The lawyer likely required personal guarantees on the retainer as well. It's part of doing business really. Creditors really don't like corporate protection (for obvious reasons) so it's pretty easy to get yourself into a situation that they're seeing... although the high number of charge-backs is something of a head scratcher.
• jonpaul 16y ago
  We often hear too much about the successes of startups that we get caught up on the glamor of it all. It's stories like these that bring us back to reality. I'm truly sorry for your loss. I'm sure that you've thought of this, but is there any by-product that you can sell out of the company? Any IP liquidation? Take care.
  • debtscrewed 16y ago
    Thank you very much. What's more is that I'm quite well known on Hacker News—not as much as patio11 to have an article written about him, but enough that a good amount of people I meet that read Hacker News say that they know me. Which makes it more stinging and 500% more embarrassing. But that makes it all the more interesting, huh? It's interesting. I licensed my technology as an SP to be used with this company, so all of the IP is mostly, well, mine. I have thought about it, but haven't reached a decision.
    • vidar 16y ago
      Dont worry about embarrassment, be upfront about any mistakes and move on.
    • Encosia 16y ago
      Don't be embarrassed. It happens; especially in this kind of economy. Unless the failure was due to gross negligence on your part, no one who matters will hold it against you.
    • anigbrowl 16y ago
      Do you remember how the founders of TipJoy and, more recently, NewsTilt were viciously shredded by an angry mob, right here on HN? No? Because failure is nothing to feel bad about unless it becomes a predictable occurrence. When you've got your breath back and blood pressure is approaching normal, consider opening up about it. While you may not be able to talk about all of it for legal reasons (eg it seems like your partner was rather dubious), sharing what you have learned from the experience, what red flags you saw but why they didn't seem worth stopping for etc. is valuable to many people. I'm easily embarrassed myself, so I know it's difficult; but don't fall into the trap of anticipating only the negative possibilities, and cutting yourself off from the sympathy and support of people who like you. Now, I don't mean 'Tell HN: OK it was me ohgodImsorry'; you don't need to humiliate yourself! Take a long bath/walk on the beach/whatever, and let go of the situation for a few hours. You poured your own money into it in an attempt to keep things under control, and it was just just bigger than you were. What happens next is in the hands of others, and you can influence but not control it. Then write your creditors, mostly the same letter, and tell them what you told us - you owe this much to these different people, you have lost a bunch of your own money, [EDIT: I misinterpreted the stuff about your co-founder, as if the person had bailed on you.], and you're sorry. Express your willingness to pay it back ASAP, but stress that you wish to do it on a pro rata basis. Of course every creditor would like to be paid first ahead of the others, but making the same information available to all indicates you have nothing to hide and is more reassuring than a non-credible promise to put someone first. If you can afford it, a small check to each, even $25 or something, speaks volumes.You might want to write to the IRS and the city or county that issues your business license too - if you're not sure what to tell them, call and ask what your obligations are. You may be surprised how helpful they can be. you can call them today and get the letters out before you go to bed (go buy some stamps if you need an excuse to get up and walk around). Then, sleep the sleep of the just. Get up tomorrow, eat a healthy breakfast, and start composing your 'How I lost a kajillion dollars and what I learned as my business followed it off a cliff' post , on your existing blog, Posterous, wherever. Throw in a couple of ironically entertaining pictures. It's not a funeral notice because you're not dead - you are now a man or woman of experience, and that experience has a value. Get that up over the weekend, realize people still like you, and on Monday you get back to work. Your job for the next week is to contact the creditors again, ensure they all have the same information, and politely but firmly stick with the pro-rata approach. Whether they agree or no, ask for their decision in writing so you can send copies to the other creditors. By the way, since it sounds like you're not in debt on your personal accounts, consider dropping by your own bank and asking a manager for advice - since they won't actually be trying to collect from you, they may be more forthcoming about how they evaluate situations like that, and heaven knows they've had plenty of experience lately. Allocate 50% of your time to debt service, and the other 50% to making some new money. That can include chasing consulting/programming work, but your existing business still has value. Call business magazines like Inc. people like Andrew Warner etc., and say you have an interesting story - use your war story post and the feedback you received on it as your raw material. Hell, call Techcrunch, because they can't milk that SuperAngel scandal forever so you might as well work the publicity angle and give them an interview. 'Life after death' is a perennial story and even success junkies need one every so often. How about your startup's business model? Your actual business may have failed, but that doesn't mean the idea itself is without merit. Can you sell the IP, or the brand, or the analytics, or the customer list, or the suspicious transactions list? Some of these may be worth money, some not, but all that information has value in some form. Just pretend you inherited it from Uncle Debtscrewed and find that value. Can you make some value out of the domain? Can you write a book? Yes. You can do all of that, and more. Because although we all laugh when a clown steps on a banana peel and falls flat on his face, what we applaud is that he gets up again afterwards. So you don't have time to brood; you launch next Monday.
• javery 16y ago
  Ok, if you formed an LLC and didn't sign personal guarantees with rackspace or your lawyer then I don't see how you are personally on the hook for this.
  • debtscrewed 16y ago
    It's a C-Corp. (Edited: made an error and said S-Corp earlier) I'm not 100% familiar with bankruptcy, but I'm assuming it'd damage my name as well as my co-founder's, as well as going into stuff I don't want to get into (court, etc.) Rather have a way to pay back this $6k.
    • javery 16y ago
      If it's an S-Corp then you are protected personally - you don't necessarily need to file bankruptcy but I also wouldn't pour anymore of your money into it if it is jeopardizing your personal finances. Talk to the vendors, explain the situation and then talk to your co-founder and come up with a plan to pay it off through the company (consulting, selling assets, etc)
    • ccarpenterg 16y ago
      I don't understand. You're in USA? It is supposed that you can fail in USA. That's capitalism!. Why do you want to pay those debts? Your company is bankrupt and it has to be declared bankrupt then go into liquidation in order creditors recover their money. Those are the rules of this game.
    • calloc 16y ago
      You are protected under a C-Corp, unless they can pierce the corporate veil in court (unlikely if you didn't do anything you weren't supposed to do) you can walk away and the only assets any of the creditors can go after are those of the company. All of your personal assets are free and clear.
      • jacquesm 16y ago
        > My co-founder owns a majority of the company Minority shareholder, so he's protected anyway, no way this could be laid at his private door, unless there is outright fraud on his account.
• famousactress 16y ago
  Does the startup have any assets/IP that are saleable? I agree with SHOwnsYou.. I'd try to buy some time.
• aresant 16y ago
  The answer is to restructure the debt, every single one of those companies deals with failures and no-pays on a daily basis. a) Most lawyers, especially extending credit terms in the startup field, will carry over that debt with interest for years. Call and state your case, make it clear it's no-pay right now either way, but you want to fulfill your obligation in the further - say start making payments in 12 months. b) RackSpace - you owe personally or through corporation? If personal, call them and have the same conversation - speak with a manager and ask for payment terms outside of normal, otherwise you have to default. If corporate consider folding and walking away, corporate protection is there for a reason and even though it's not a stand-up thing to do, Rackspace's world is littered with bankrupt startups. c) Visa & MC may be your big problem, getting blacklisted from merchant accounts isn't the end of the world but certainly something to avoid. Also nearly impossible to reach a human that can make decisions on terms. For a startup they should have a 20% merchant reserve on your account anyways, how far does that take you? Bottom line, think 6 - 12 month terms instead of 12 day terms. No reason at all you can't get there with the right amount of sucking it up and pleading your case.
  • debtscrewed 16y ago
    Thank you. a) Yes, and I'm dealing with a startup lawyer, at a very well-known Silicon Valley law firm (this is when we had money). He's been very very patient with our lack of being able to pay the retainer. b) Through the corporation. It's registered under the Inc and has the EIN associated with it. However, it also has my SSN associated as the primary contact. c) Well, I have a feeling that most of our credit card transactions are fraudulent, being in the space we are in. (For example, someone charged $12k on a card and tried to cash out to PayPal.) I'll call up Rackspace and give it a shot. Thank you.
    • rwhitman 16y ago
      The last startup I was involved in, the guy who was running it talked to the lawyers and got them to waive a good chunk of the retainer fees when it sank
      • 16y ago
• maxharris 16y ago
  Is there any way you can turn your experience with evil people defrauding your credit card merchant account into something that you can build a startup on or consult with? Or was it just a minor avoidable error that balooned out of control and that other people aren't likely to have trouble with? How did the fraud occur? Who did it, where were they, and what did they do technically to steal from you?
  • yock 16y ago
    Indeed, I'd be interested in hearing more about the fraud as well; however, I'd imagine that this may be an embarassing part of the story for the OP. There is mention of a large number of chargebacks, which to me indicates that a large portion of his legitimate clients believed that a service was not rendered or product not delivered.
• vaksel 16y ago
  negotiate with all of those companies to lower the total, then get one of those 0% apr for 9-12 months. Use the checks they give you, to pay down your debt. This way you'll be down to 4-5K and you won't pay any interest on it for a year...which should give you plenty of time to get back on your feet
• lkrubner 16y ago
  I had a client who racked up an $18,000 bill with RackSpace, a debt which needed to be restructured. I think it took a year to negotiate, but eventually Rackspace let them go with just a $3,000 payment. So talk to Rackspace. Explain the situation. You might be able to talk them down.
  • debtscrewed 16y ago
    Wow, that is fantastic. What kind of long-term effects happened? I'm guessing he would never be getting account with Rackspace in the future.
  • d2viant 16y ago
    How can someone rack up an $18,000 bill? Was that just over a single month? I'm not a client of Rackspace, but I thought they billed out monthly, so if you don't pay your bill I thought they would shutdown your service. What happens, do they leave your service running and just let your bill compound?
    • qeorge 16y ago
      Rackspace is a little different than most hosts. They want you to sign a paper contract, and will give you better prices if you commit for at least 12 months. So its possible the OP had a good bit of time left on a contract, which he's now on the hook for. It would also make sense for Rackspace to take a smaller payment in such a case, as they wouldn't have rendered the services yet anyway.
    • chopsueyar 16y ago
      Mid-month bandwidth overages. I had to deal with a Rackspace account and bandwidth overage one week into a new billing cycle. IIRC, it was something like $2.50 per gigabyte after the first 1.5TB. The more you pay per month, the higher the limit, and lower the per gigabyte overage fee. Somewhat akin to a US cellular telephone company (without bandwidth rollover bytes).
    • lkrubner 16y ago
      > How can someone rack up an $18,000 bill? I'm not sure I understand what you are asking here. I'm sure Rackspace has many clients who run up charges well over $100,000 every month. RackSpace handles some very large clients. Recall that YouTube started out on RackSpace, and was on RackSpace at least till the end of 2006 (I forget the exact date YouTube left RackSpace). RackSpace actually invented a special low rate (regarding bandwidth), just for YouTube, but, instead of paying monthly, YouTube had to pay daily, in exchange for that ultra low rate. I'd guess that RackSpace clients probably follow something of a power curve, with the top 1% of their clients using something like 30% or 40% or 50% of all the bandwidth that RackSpace sells. And of course, that top 1% would have very large monthly bills.
• arimat 16y ago
  The whole point of an LLC is to have limited liability. If you haven't been involved in any fraud or misrepresentation, nobody can go after your assets except in some very specific cases. You need to speak with your lawyer, or do a little research.
• whalesalad 16y ago
  Sell your car?
• alain94040 16y ago
  If you did everything right, all your debt should be under the company's name, not yourself personally. Therefore, you're fine. The company can't pay. That's called bankruptcy. Creditors are pros too, they should be used to it.
• jacquesm 16y ago
  It is in rackspace's own interest that you pay off, by sending the bill to the debt collectors they're going to end up with less than if you strike a deal with them, especially if the debt collection process forces you in to bankruptcy. In whose name is the rackspace account? Corporate? Private? Are you incorporated? Basically what you have to do is to come to an agreement where you contractually agree to pay them an X amount per month + some interest on the outstanding balance. Make it clear to them that if they go the debt collection route that they will likely get nothing at all but that if they will come to an agreement with you that they have your word (for what that's worth) to make up for the hole. How did it get this far? I'm sorry to hear about the credit card fraud, every time someone here says they'll do their own processing I keep hammering on that, so I'll use the occasion to do it once again: Please do not do your own processing, use an IPSP that has very thorough fraud controls and scrubbing in place or you are very likely to get burned. As for your lawyers fees, it sounds to me like he'll have to give you a discount. Your co-founder being 'unreachable' is not very nice, in for the good times together, in for the bad times together, let's hope he turns up and will shoulder his part of the problem. Kudos for not going incommunicado like your co-founder.
  • debtscrewed 16y ago
    Yes, it is. I'll try to talk with them. Corporate. Incorporated in Delaware. Thank goodness. I'll try to see if they're good with the payment. I'm just not... like that, though. I'm not one of those guys that can call up Rackspace and be like, hey, if you go into collections, you won't get shit, so we're doing it my way. You know? Lots of time passed before I came to my senses. Thank you for your help, Jacques. You know me, and I'm thankful that you're imparting your advice.
    • eds 16y ago
      Now's the time to start. But yeah, you don't say "we're doing it my way." It probably sounds more like, I'm broke, I want to pay you back, what can we do to help me make it happen?
    • jacquesm 16y ago
      > I'm not one of those guys that can call up Rackspace and be like, hey, if you go into collections, you won't get shit, so we're doing it my way. Trouble is the time you learn the most, this is also a part of doing business, over the years I've had a few occasions to have to bring 'bad news' (in some cases very bad), you will have to bite the bullet on that one. > Lots of time passed before I came to my senses. Hope is sometimes a dangerous thing. > You know me Drop me a line, maybe I can do something a bit more concrete.
• bherms 16y ago
  1) Try to buy time. Debt collectors will work with you. 2) Restructure as aresant said. 3) Set up payment plans with the people. Even if you owe $10,000, telling them you're broke and sending $50/month until you find more money usually will get them off your back. It shows you're serious about paying and is a good faith sort of thing. 4) If all else fails, remember, it could be worse. Having bad credit sucks, but isn't the end of the world. Protect it if you can, but your life isn't over if your credit gets screwed. Trust me on this one.
  • dangrossman 16y ago
    It's not about credit. Any time a merchant account is closed for cause, such as having too high a chargeback rate, the underwriting bank has a contractual obligation to place the merchant in the TMF (Terminated Merchant File) and MATCH list. Both the company AND the names/SSNs of the principals of the company are listed. This is intended to protect other banks -- so that a company with a history of payment fraud or other problems can't simply go bank to bank as each account is closed. Being on TMF/MATCH can prevent you from opening a merchant account for future business the rest of your life. Very few banks, almost none in the US, will open a merchant account if any of the owners of the company are listed.
    • bherms 16y ago
      Ahh, I see, I didn't know about that. Thanks for the info! :)
• joeag 16y ago
  1. even if a company does business as an LLC or C corp, etc. if there wasn't much in assets when it was started (like cash), your corporate entity probably doesn't holdup; 2. most likely, you signed a contract with Rackspace personally right? 3. as for the merchant/credit card account - most require a personal guarantee anyway So, first of all - I am sure your lawyer will defer or write off a bunch of that bill - happens all the time, especially if you have already paid a number of previous bills. Rackspace is probably doing what most creditors do - acting as aggressively as possible. If they turn it over to collection, they are already looking at a huge writeoff (collection agencies get a nice percentage of whatever they collect and usually also have authority to write down the debt substantially in offers in compromise). So when push comes to shove, if you offer them a payment plan, I bet they will go for it or at least counter offer. Offer them $1,000 now, and $500 a month for 10 months say - that's full payment of the account. If you feel lucky, offer $3K, $1K now and $500 a month for 4 months. The credit card account is going to be sticky - because unlike rackspace who made a profit margin on the $6K you owe, the credit card company has probably already refunded the $$ to cardholders that it "paid" to you - the fact that you describe it as "huge" doesn't help - I would assume it may be the majority of all payments advanced to you by the merchant provider. Again, you can probably propose a payment plan which has a good likelihood of being accepted. Good luck.
  • Muzza 16y ago
    Could you elaborate on point 1?
    • joeag 16y ago
      If a corporate entity is created and funded with very little in the way of assets it can be disregarded in a legal proceeding. This is called "piercing the corporate veil". There are other factors a judge or jury will weigh as well, but assets are among the most important. This is pretty common sense if you think about it - although most people (especially those who read the "incorporate for $99 and protect yourself from creditors) don't realize it.. just because you sign some papers and create a legal entity the law isn't going to allow you to stiff people and evade legal obligations.
• maxawaytoolong 16y ago
  It's no big deal. If you don't have the money you don't have the money... I had a similar situation at my first startup where I was on the hook for $36,000... not $9k. And everything worked out fine. You will have to restructure the debt and it will probably nick your credit but that's not the end of the world. I will comment though that people are often confused about forming companies to prevent personal liability. If you are the only person on the books for the company, you're still on the hook for everything, whether you've got an LLC, C-Corp, S-Corp, etc.
• CatalystFactory 16y ago
  If you formed your entity correctly (I assume this is where your $3k debt to your lawyer came in), you likely can declare bankruptcy for your company and take no personal liability. You might want to find family and friends who can loan you the money without interest. Can you sell the domain? Just curious, how did you get so much debt from your lawyer. Hope it works out and best of luck.
• EGreg 16y ago
  Work something out with Rackspace. They will be happy to not report you to the credit bureaus. That leaves about $3k to pay to the lawyer. And maybe you can work something out with him too so he doesn't report you to a collection agency, which is probably a hassle for him anyway.
• jonpaul 16y ago
  As far as Rackspace goes, contact Rob (@kr8tr) and see if you can work out a payment plan. He has a real passion for great customer service. Plus, he's a cool dude.
  • lrm242 16y ago
    Seconded, thirded, fourthed, and fifthed. Rob is awesome. You can send him a DM on Twitter or just call him. He puts his phone number on his website.
• danilocampos 16y ago
  An odd thought – you may be doing yourself a disservice by posting this through your throwaway account. If you are as well known as you say, your reputation might open some doors for you. Some people who like you but assume you're busy doing your thing may be excited to do some work with you that would solve your problem. Moreover, relationships matter. So if you're a menschy guy, someone whose brother works at Rackspace, for example, might take this through a back channel on your behalf. Pride is tough. Looking back on the last time I fell on tough times, my biggest mistake was not being more transparent about my situation to people who liked me. I felt weird and silly to be not successful, to have failed, but I ended up making things harder on myself.
  • stuff4ben 16y ago
    I would hope that anyone who wants to help in this way would contact the person behind the throwaway account. If your excuse was "they used a throwaway account and therefore I won't help", I'd imagine you weren't going to help regardless.
    • jacquesm 16y ago
      That would be doable if the throwaway account had an email address associated with it, but it doesn't. edit: it does now.
    • danilocampos 16y ago
      I think the "excuse" if you could call it that is people have no idea who this is and have no way of contacting them. Besides that, people choose who to work with based on reputation. I'm saying if this person has banked credibility with people over an extended period, he could probably pick up a few gigs from fellow HNers. At this point, no one knows anything about this person, and so they have no idea what skills or other unique value to ask for or trade cash for. Besides, you're much more likely to go out on a limb for someone you know is a good guy.
• uvince 16y ago
  I think this is exactly what Lending Club is for. You'll pay 9-12% interest/year, but you'll get a loan based on credit score, personal reasons and your ability to tell a story on why/how you'll pay it back: http://bit.ly/lending-club http://bit.ly/lending-club
  • mahmud 16y ago
    Even shorter: http://lendingclub.com http://lendingclub.com
• protich 16y ago
  $6k in server fees?? Was it over a couple of months? I'm curious to know the space your startup is in for that kind of server fees.
• huhtenberg 16y ago
  Talk to your parents, perhaps? (downvoting, eh?) Talk to them about a loan.
• johnarleyburns 16y ago
  This is why you should be using Google AppEngine and free providers, so you don't get on the hook like this.
• jimdotrose 16y ago
  First point of advice would be to take a deep breath and slow way, way down. Everyone is pressuring you because they know you don't have cash and they want to get paid first before everyone else out of a dwindling set of assets. Slow the process down. Time - although it may not seem like it now - is on your side. Don't sell your car, don't take on a consumer loan. Slow down. Your debt, while big to you, is minimal to the people you are working with, so they should be open to working through the issue with you. a) Your lawyer, if it's a big firm, probably has a $2-3mm+ book, and a non-collection of $3k isn't going to effect them one bit. S/he has an incentive to work with you to come to an agreement on payment (if any) to maintain the relationship. Treat them with respect and you will get it in return. Deal with this bill last because it will be the easiest to manage. b) $6k rackspace bill. Escalate the issue through the accounts payable department by explaining the situation and telling them they aren't going to get paid in full. If the first person on the phone doesn't get it, escalate to the next level, then the next level, etc. The gatekeeper's job is to put pressure on you to pay and create anxiety, which they seem to have done. Once you get someone willing to work with you, fight to reduce the balance and then extend the payables as much as possible. For the value of the balance, figure out what rackspace could get by selling your receivable to a collections agency and offer slightly more - if they get $.18 per dollar owed, agree to pay $.19. Then, stretch the time period as much as possible. c) Merchant account. This is where I would focus. This is your greatest exposure. Even if you didn't sign a personal guarantee, this could follow you professionally. Get on the phone with the merchant account holder and start dealing. Get the balance down to their cost first (that shouldn't be hard), and then see if you can grind it down farther. They have a loss reserve for this exact reason. Be open and transparent and pay the least amount possible while avoiding getting on the blacklist. Bankruptcy (I'm not an attorney, so take this with the necessary grain of salt) is the last resort. It's long and painful for everyone involved - including you - and none of your creditors want to go there. Your creditors have an interest in working out your debts with you without going to court.
• Mentat_Enki 16y ago
  Never use your own money! Borrow and lose other people's money. It's the American Way! wink (Note: I am an American, and thus reserve the right to poke myself in the eye.) (While this was meant to be funny, it's really meant to be "ha-ha serious" not "ha-ha funny". Start-ups are by-nature risky endeavors. Putting your own financial well-being on the line in this fashion is as foolish as tight-rope walking without a net. If you've got a C-corp your personal assets should be somewhat protected. Make sure to do your homework on this...) Oh, and last of all: Don't Panic. You can always flee to Europe or elsewhere. ;)
• betaPass 16y ago
  If you are getting the message: "You're submitting too fast", and you need to reply soon, just access HN through web proxy,create an acc, and submit! :)
• growl 16y ago
  try to press hard to get the consulting fees
• palehose 16y ago
  Unless you are specifically looking to avoid responsibility for this debt and are planning to let your startup sink, I don't understand why you wouldn't pay for your debt with a credit card.
• joystickers 16y ago
  Can you go into detail, perhaps outside of HN, as to how you got to this stage? It could be a valuable lesson for others.
• mcdowall 16y ago
  Reading this rings very true to home for myself and I completely understand your situation having gone through and similarly going through the same. I used to live and breathe my start-up, be passionate about the startup scene and thought my project was on the fast track. Debts mounted up and deciding who to pay first / last is somewhat stressful. I personally focused on paying the areas that would potentially come back to haunt me in my career first, I then restructured and negotiated settlement amounts. The surprising aspect for me was that negotiation is entirely possible, the small amount that firms expect to receive from insolvency is significantly lower than a settlement plan with yourself. I won't go over my specifics as this is about you, but if you ever want to chat or just some advice in how to deal with this on a personal / mental level let me know.
• tptacek 16y ago
  I don't get it. You're a Delaware C-Corp. You don't owe anything, do you? Don't take out a loan. Don't restructure your debts. Don't negotiate with your creditors. Don't sell your car. Don't take a loan from your parents. Don't incur anything more than nominal legal bills. Collect your contracts and take them immediately to your personal attorney and have them reviewed before you attach your own personal credit to your business'. Doing so is almost certainly unnecessary. You are probably just fine. You are a businessperson, but you're not thinking like one, and you are going to get screwed. When your company's creditors worked out contracts with your business, they understood that they were assuming the risk that the company might go out of business and be unable to pay. That risk was priced into your contract terms. If people you've done business with are now telling you that you should stake your personal finances on the debts of your company, then, absent some poorly thought out up-front agreement you had with those vendors to the contrary, you're being taken advantage of. Perhaps we'd benefit from hearing more about who those people are. As for the merchant account: well, the people saying you could be blacklisted sure sound credible, and maybe you should listen to them. But please also note that there are people on this thread saying you should sell your car or take out a loan to satisfy someone else's debts, and take all the advice you get here with a big grain of salt. It shouldn't cost more than a couple hundred dollars to have an attorney explain to you (not your company, not your cofounder) that you are almost certainly not liable for thousands of dollars of company debts.
  • jacquesm 16y ago
    Second all of that. It has since come out the person writing this is a minority shareholder of a C-Corp so his liabilities are much smaller than what it seemed to be like initially. It would be nice to know if he was/is a signing officer.
    • deleted 16y ago
      [deleted]
      • tptacek 16y ago
        I think you are probably just dead wrong here. I'm prepared to find out otherwise when 'grellas comes in here and stomps on all our crazy speculatifyin', but I'm willing to stake some personal HN reputation on this assertion: what you are saying is crazy-talk. What's at issue in this situation isn't the size of the stake in the company you own, but rather the fact that (say) Rackspace agreed to do business with your company and not you. For you to be on the hook for Rackspace/Company debts, Rackspace will have to convince a court that both you and Rackspace had an understanding that you were the one making a hosting agreement. Against that will be the fact that they invoiced your company, accepted payments for your company, signed a contract with your company, and that the service they provided was used solely for your company. Since companies go out of business all the time, my guess is that this never happens. Why would Rackspace waste time going after company debts when 99% of the time they'll never see a dime, and, on occasion, may risk legal action themselves by bringing frivolous lawsuits? There are situations where you can slip up and obligate yourself to your company's creditors; if you Google, you'll find out for instance that in Iowa you want to be very careful about how your company's checks are layed out and signed. But it is not the case that "if you just slapped something together on Bizfilings.com you're probably not protected". Generally, for contacts: limited liability corporation is a limited liability corporation.
• beentherebefore 16y ago
  ironically, you're in the dominant position for negotiation. the creditors will try to lean on you (and possibly quite hard), but they're just trying to walk away with as much cash as possible. start throwing the 'bankruptcy' word around, that should cool off most creditors for the time being. communicate your situation to them and don't make any commitments until the dust has settled. don't pay anyone until you consult a few lawyers. if that takes longer than 12 days, so be it. remember, if you do pursue bankruptcy (which may not be a bad option for a failed business), the judge will ultimately decide who gets paid what amount. no one creditor can walk away with a disproportionate share of the assets (subject to debt rankings). this removes all leverage for subordinated debt. your first call needs to be your current lawyer. explain your situation and ask for a referral to a bankruptcy lawyer. your next calls should be to your network for more legal referrals. as these lawyers for a 30 min consultation off the clock. if they want your business, they'll give it to you. most importantly, don't let '12 days' pressure you. your creditors can wait. they may get loud, but they can wait.
• andjones 16y ago
  First, take a deep breath. Second, approach the situation honestly. Honesty does not mean you need to approach everyone on your knees. Most of your creditors likely do not know what situation you are in right now. Many people actually enjoy finding creative win-win solutions. You never know unless you ask. Third, good luck. Looking back at the low parts in my life, they all worked out one way or another. Without challenge and without hardship, I would not appreciate what is good in life. Learn what you can and always remember to smile :)
• nikosdimopoulos 16y ago
  The first thing to do IMO is review ALL the legal documentation that you have. This means: 1. What is your role in the company. Are you just another employee or does your contract 'tie' you in some way with the company's assets and liabilities. 2. Is there anything in the contracts that you signed (if applicable) that relates directly to you personally? If yes concentrate on that one and nothing else. 3. Just because you poured money in the business, it does not necessarily mean that you are responsible for its liabilities. Review the documentation with a lawyer as to what your exposure is towards this situation. From the looks of it, the merchant account is your 'weakest link'. Follow the advice of others here by talking to the merchant and sorting something out. Chances are that the future is not as bleak as it seems now. There are always choices. Remember: Ask and you shall receive. Asking the relevant parties for extensions, better terms of payments etc. is not bad. The worst thing that can happen is for them to refuse. Good luck and stay strong. There is always light at the end of the tunnel!
• rjamestaylor 16y ago
  I work with Rackspace and would like to discuss your situation. Please contact me by email - robert.taylor@rackspace.com or by phone - +1.210.548.5616. Robert J Taylor Sr Sys Engineer / Mgr, Realtime Customer Intervention Rackspace Hosting robert.taylor@rackspace.com TF: 800.961.4454 x 501-5505 O: 210.312.5505 M: 210.548.5616
  • jrockway 16y ago
    I always love to see this sort of thing on HN! I was going to say "this sort of thing makes me want to move my servers to Rackspace", but they're already there ;)
  • huherto 16y ago
    This speaks really, really good of Rackspace.
  • swiftonfire 16y ago
    This sort of thing gives me hope
• lzw 16y ago
  Note something about collections: Collections agencies are not a party to a debt and thus they have NO LEAGAL RIGHTS, and further they do NOT have the right to "destroy" your credit, or even to affect your credit. You owe money to the original party, and you only have to deal with the original party. You need to protect your credit by sending a "Cease and desist" to any and every collection agency that writes you about any debt. Send this by registered mail, return reciept as they are notorious about committing perjury and claiming they never received such letters. When you have proof, you will have them on the legal hook if they report the debt to a credit reporting agency or participate in any collection activities, including claling you, after recieving the C&D. You can find forms for these online... Here, I'll attach one below. The original creditor maintains all rights, and they can sue you, or they can contact you, or attempt to work out an arrangment. By turning it over to a collection agency they have indicated that they don't think they can collect and are writing it off, which is fine as this is one of their options. But don't let your credit be hurt. Send the C&D to the collection agency, and they are prevented from reporting the debt on your credit report. Often this is also effective in gettign the original creidtor to actually talk to you so that you can work out payment terms.... and since they already wrote off the debt they should be willing to accept good payment terms (like 10 years, no interest, monthly payments starting in 6 months after you send them a $200 initial good faith payment... that's what I'd propose.) Collection Agencies pretend like they have the authority and will pretend like they can sue you, they often pretend like they are law offices.... but remember their job is basically to intimidate you or trick you into paying, anything to get you to send a payment. But under the law, you have no contract with them, you never agreed to deal with them, and they have no legal rights. The original creditor can sue you, but if they were going to do that, they wouldn't have turned it over to a collection agency in the first place (Which keeps a large chunk of what they collect.) So, don't let your credit be damaged-- be on the ball with the C&D and you can not only keep collections from harassing you, but force any creditor who really wants their money to work with you on terms. [Your Name] [Your Mailing Address] [Your City/State/Zip] Certified Mail, Return Receipt Requested # [Insert the Certified Mail Receipt Number here] [Insert Date of Mailing] [Insert name of collection agent, if available] [Insert name of collection agency] [Insert address of collection agency] [Insert City/State/Zip of collection agency] REF: Account # [Insert either the original account number or the collection agency's account reference number here] Dear [Insert name of debt collector calling--if available--here]: 1. You are hereby notified under provisions of Public Laws 104-208, also known as the Fair Debt Collection Practices Act, that your services are no longer desired. 2. You and your organization must CEASE & DESIST all attempts to collect the above debt. Failure to comply with this law will result in my immediately filing a complaint with the Federal Trade Commission and the [Insert your home state here] Attorney General's office. I will pursue all criminal and civil claims against you and your company. 3. Let this letter also serve as your warning that I may utilize telephone recording devices in order to document any telephone conversations that we may have in the future. 4. Furthermore, if any negative information is placed on my credit bureau reports by your agency after receipt of this notice, this will cause me to file suit against you and your organization, both personally and corporately, to seek any and all legal remedies available to me by law. 5. Since it is my policy neither to recognize nor deal with collection agencies, I will settle this account with the original creditor. Give this matter the attention it deserves! [Sign your name here] [Insert your name here]
• donohoe 16y ago
  My co-founder owns a majority of the company but he's traveling so he's a bit unavailable. Well, he/she better get on the next plane back and help sort this out. Seriously. If things are this bad they need to do their part. They need to be making phone calls regardless of where they are. No offense, but it sounds like if the company was on a downward spiral it was a bad time to take a vacation.
• mkramlich 16y ago
  Perhaps the government can bail you out. Just call your friends inside the Treasury Department, etc. Cake. ;)
• k3dz 16y ago
  time to start a new category.. "Help me, HN"
• ahoyhere 16y ago
  1. Own up to you who you are. If you treat this like a dirty secret, you're going to spend the rest of your (online) life hoping that nobody finds out "the real you" and what your life/work is "really" like. People who fail collosally, and have the guts to share that, are usually held in great esteem. People who hide their failures til they're found out by someone else, on the other hand, don't get such respect. Trust me on this one - I've fucked up at least as big as you have. 2. Use your network, name, and rep to get a couple freelance contracts. Explain that you're willing to work really hard, so long as you can find a couple people to pay you up front because of these extenuating circumstances. People LOVE to watch somebody kick the ass of difficulties. You will find 2 people on HN to pay you $3k for freelance work. Heck, I would, if I knew who you were. I think it's honorable that you're not looking at just abandoning the debt because you can, but, as a last resort, if you're legally protected behind your incorporation paperwork, do it. There's no reason for this to wreck your life. (And really, seriously consider my advice. Own it. You'll feel better and nobody will think less of you.)