Can I settle a business credit card debt that I personally guaranteed?

Yes. A business credit card that you personally guaranteed can be settled like any other unsecured debt. The personal guarantee makes you individually liable for the business's debt; settling reduces your personal liability. The business entity (LLC, corporation) remains technically liable for the original balance, but in practice, the settlement releases both the entity and you from further collection.

How personal guarantees work on business cards. Most small business credit cards require the business owner to sign a personal guarantee. The business is the primary obligor; you are personally liable as guarantor; the lender can pursue you personally if the business does not pay.

Settlement process. Negotiate with the lender or collector for a payment of less than the full balance in exchange for full release of both the business entity and you personally as guarantor. Typical settlements range from 30%-60% of the balance. Get the agreement in writing on the lender's letterhead before paying.

Required terms in the settlement agreement. The amount paid; statement that this amount fully resolves the debt; release of both the business entity and you personally as guarantor; agreement that the lender will not pursue further collection from either party; specification of how the debt will be reported.

Tax implications. The forgiven portion of debt is generally taxable as cancellation-of-debt income. For business debts, the COD income is typically reported on the business's tax return. Consult a tax professional for your specific entity structure.

Effect on your personal credit. Some business card issuers report business card activity to personal credit bureaus (Capital One Spark, Chase Ink); others report only to business credit bureaus (American Express Business cards). Settlement of a business card with personal-credit reporting affects your personal score.

Effect on business credit. Business credit bureaus typically receive reporting of business credit card activity. Settlement is reported as a negative on business credit, which can affect future business borrowing capacity.

Negotiation leverage. Lenders are often willing to settle business cards that have been charged off. Offer 20-30% as your opening offer; expect counters in the 35-50% range.

Comparison to bankruptcy. Personal bankruptcy can discharge your personal guarantee on a business card. The business itself may need a separate filing if it has assets and ongoing operations.