The COVID crisis and the government assistance came through so fast that you may not have understood the documents you signed to get help to maintain your business. The future was unclear, and the government was offering money. However, now the business world is returning to ‘normal’ and now the payment demands are starting from the SBA. Your business is not where it was pre Covid, and you are having trouble making the SBA COVID Loan payments. How can a bankruptcy attorney help you?
The COVID EIDL loans under $400k were not secured personally by you. However, the SBA took a UCC filing and an interest (lien) against your business assets and accounts. So that means that if your business does not have the assets or income to pay, the SBA cannot seek payment from you or your personal assets. It does mean that the business is on the hook and if it cannot pay or the business closes, the SBA has the right to take your accounts receivable and your business assets and supplies up to the amount of the loan and interest. If your loan was over $400K or you signed a personal guarantee then if you do not pay the SBA can attach your personal assets, tax refunds and business assets. The SBA can garnish your wages and seek all other legal forms of forced payment.
When is it Time to Speak to a Bankruptcy Attorney?
So now what….. If the business is no longer able to function profitably and you are considering closing the business and you have not personally guaranteed the SBA Covid Loan, then you can work with your bankruptcy attorney to close the business. That includes providing notice to the Secretary of State and all taxing authorities. If you personally guaranteed the loan and the business cannot pay the loan then you can file for personal bankruptcy on the EIDL loan and all of your other personally guaranteed business and your personal debt. This will leave the business ‘on the hook’ for the loan but if the business has not assets or income there is nothing for the SBA to collect against.
The planning and execution of a bankruptcy with personally guaranteed business debt is complicated and should not be attempted without an experienced bankruptcy attorney. Moseman Law Office has the experience to help you navigate through this situation.