HomeAre SBA Loan Debts Dischargeable In Chapter 7 Bankruptcy?

Are SBA Loan Debts Dischargeable In Chapter 7 Bankruptcy?

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Can an SBA Loan Debt Be Wiped Out in Chapter 7 Bankruptcy? Lawscape Explains

Hey there! You’re probably here because you’re contemplating on filing for Chapter 7 bankruptcy to discharge an SBA loan debt. So here’s the million dollar question – Can SBA loan debts be discharged under Chapter 7 bankruptcy? Yes, they generally can. But there are a few pitfalls you need to be aware of.

What Could Go Wrong?

Let me paint a hypothetical picture for you. You’re neck-deep in debt and you’ve finally decided to file for Chapter 7 bankruptcy. Only, you’re not out of the woods yet. The risk? The SBA 7(a) Lender, Certified Development Corporation (CDC) or the SBA could turn around and file a Complaint initiating an Adversary Proceeding under 11 U.S.C.A. § 523(a)(2)(B). What does this mean for you? Simple, your SBA loan debt may not be discharged.

When Things Get Messy

Now, let’s discuss the charges that might be flying your way if such a scenario arises. You might be accused of fraudulent misrepresentation. They’ll claim that the loan was availed under false pretenses. Essentially alleging that you misled them with false or exaggerated financial statements. This could be about either your business or you as a personal guarantor.

And Then, The Law Steps In

If you’re curious about the legality of it all, I’d like to draw your attention to 11 U.S.C.A. § 523, which governs non-dischargeability of debts. It clearly lays down the conditions under which a debtor cannot be relieved of his/her debts.

When The Judgment Hammer Falls

You’d think, how could they possibly back up such claims? The Plaintiff would have to prove that you tried to deceive them with cooked up financial documents. Not just this, they’ll have to convince the court that they extended you the loan because they trusted these statements to be genuine.

Crossing The Law Line

The stakes are high, and things could get even more complicated. Are you, by any means, inviting criminal charges? If your actions align with fraudulent behavior, you might be facing charges of grand theft or related fraud.

When Things Spiral

You need to be super careful as there are two more areas where things can get messy –
1. Fraud in a fiduciary capacity
2. Willful and malicious injury

They might accuse you of misusing funds with a clear intent to commit fraud. In the second allegation, they could reason that your actions knowingly caused them financial harm.

Who Holds the Power?

In the end, the bankruptcy court has the absolute right to decide whether your SBA loan debt takes a hike or stays put. It can also determine just how deep a pocket you’re going to need to sort this.

Lawscape Can Help

So, should another sleepless night loom ahead, remember you don’t have to navigate these choppy waters alone. Reach out to us, the Lawscape, and take advantage of our expertise in SBA or Treasury workout. We’ll analyze your situation and advise you on possible solutions. From the jaws of bankruptcy to fiscal squabbles – we’ve got your back!

Why Choose Us?

Millions. That’s the dollar amount in SBA Debts that we’ve tackled through negotiations and compromises, without forcing our clients to declare bankruptcy. We’ve faced off with the Treasury on countless occasions – be it AWG Hearings or Treasury Offset Program Resolution. We’re ready to represent you Nationwide; before the SBA, The SBA Office of Hearings and Appeals, the Treasury Department, and Bureau of Fiscal Service. Don’t lose sleep over it. Call us today at 1-212-460-5004 for an initial consultation.

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Lawscape Can Help You Manage Your Business Debt

If you’re struggling with business debt, we can help you understand your situation. During the initial consultation, we’ll go over the contract, and other legal documents you signed. After that, our firm will work with you to get a better understanding of your situation, and help you come up with a game plan that keeps your business alive. 

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Everyone has different types of business debt. What matters is that you take it seriously. Regardless of whether it’s secured, or unsecured, you need to work with a firm that understands how to negotiate, reduce, settle, and manage, this business debt. 

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