HomeShould I File An SBA Loan Bankruptcy?

Should I File An SBA Loan Bankruptcy?

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Failing To Repay Business Debt Isn’t The End

Many business owners think failing to repay business debt means: your business is over.

This simply isn’t true. Business debt is a problem which CAN be handled, just like everything else; but only if you take pro-active steps. Lawscape helps you understand the law, and works with you to make sure that business debt isn’t the end of your business. 

What Are Some Ways We Can Help With Business Debt Relief?

Our experienced business debt relief consultants are here to help you through this stressful time. 

Alright, ready for a chat about SBA loan bankruptcy? Strap in and let’s tackle this. So, let’s say your business is going through a rough time – COVID has hit many businesses hard, maybe yours included. There comes a point when you might consider this just isn’t working anymore. Plus, there’s this big ol’ SBA loan hanging over your head. So, you might scratch your forehead, wondering, ‘Should I file for SBA loan bankruptcy?’

Looking Into SBA Loan Bankruptcy

Usually, if your business is structured as a C corporation, S corporation or limited liability corporation (LLC), bankruptcy doesn’t make a lot of sense. Here’s the lowdown: When you acquired your SBA loan, it gave the lender a lien on all your business assets. If you don’t know what a lien is, think of it as some sort of “legal claim” or “security interest”, right? In a nutshell, the lender can take your business assets if you file for bankruptcy. You can find more about business structures here

Yet, There Could Be Some Exceptions

But look, there’s always exceptions. Let’s say your business has assets that the SBA lender doesn’t have a lien on, and multiple creditors are knocking at your door. In that case, a Chapter 7 bankruptcy might be a viable option. It could allow for a more orderly winding down of your business and distribution of assets. It’ll also put a hold on any ongoing lawsuits and help to control the dissolution of your business.

A Twist in Case of Sole Proprietorship

If your business was a sole proprietorship, the SBA loan bankruptcy might be your best path. Here’s why – you are personally responsible for the loan. Those “business only” pledges for collateral? Yeah, the lender will still chase you for their money. And now, your personal assets are on the line. A Chapter 7 bankruptcy will halt any collection actions and, crucial to note, discharge your SBA loan obligation.

But What if Your House Was at Stake?

A tricky situation arises if you put your residence as collateral when obtaining the loan. A Chapter 7 bankruptcy won’t deter the lender from seeking foreclosure on your house. They can get permission from the bankruptcy stay and proceed with foreclosure to repay the loan. So you might wonder, what’s left to do?

An Alternative: Chapter 11 Subchapter V Bankruptcy

In such a situation, you might think about a Chapter 11 Subchapter V bankruptcy if you are keen on keeping your property. This type of bankruptcy allows you to repay the debt on terms you can afford. You can spread the repayment over several years, rather than paying all in one chunk or face foreclosure.

Even though you still have to clear the debt, the Chapter 11 Subchapter V provides a lifeline for you to hold onto your house. You’ll need to pay off the secured debt – the lien on your property – in full. However, your remaining debts would be proportionately paid off under your bankruptcy repayment plan. Unsecured creditors might get something, but likely not the full amount.

Consider Professional Assistance

As the folks at Lawscape, including the charismatic Lawscape, we’ve been into helping business owners like you navigate through such convoluted scenarios. We’ve seen millions in SBA debts resolved via Offers in Compromise and repayment agreements, circumventing bankruptcy and home foreclosures.

We’ve been able to defend against millions in Treasury debts through AWG Hearings, Treasury Offset Program Resolution, Cross-servicing Disputes, Private Collection Agency Representation, Compromise Offers and Negotiated Repayment Agreements.

Authorized by the Agency Practice Act, our seasoned attorneys can represent federal debtors nationwide before the SBA, The SBA Office of Hearings and Appeals, the Treasury Department, and the Bureau of Fiscal Service. So, if you’re grappling with a tricky SBA loan situation, don’t hesitate to get in touch!

Remember, before you make any decision regarding SBA loan bankruptcy, always consult a legal professional to discuss your specific situation and options.

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. 

Discuss your situation today

We are here to help you, and want nothing more than to help you save your business. Speak to our business debt relief specialists today.

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