It’s an important question to ask when considering the financial future of your business: can you file bankruptcy on an SBA EIDL loan? The answer to this question is yes, but there are some important exceptions.

Can you file bankruptcy on an SBA EIDL loan?

The short answer is yes, you can file bankruptcy on an SBA EIDL loan. Chapter 7 business bankruptcy, specifically, can work to liquidate and minimize the debt amount that the business must pay. This will help take care of some of the financial burden that comes with an EIDL loan.

However, it is important to note that although the EIDL and PPP loans are dischargeable in bankruptcy it does not mean the SBA is not able to act on any secured portion of the loan. The SBA may still be able to collect against your personal guarantee or other forms of security.

Additionally, if your loan was between $25,000 and $50,000, the SBA has special rules that may limit the options available to you. In this case, it is important to speak with a bankruptcy lawyer to ensure that you understand the implications of filing for bankruptcy.

Is an SBA loan dischargeable?

In most circumstances, an SBA loan may be discharged in bankruptcy. SBA loans are treated no differently than other types of debt, and the decision to include them in a bankruptcy filing is ultimately up to the business owner.

It is important to speak with a lawyer about your specific circumstances to determine if bankruptcy is the right option. Now, it should be noted that although bankruptcy may be an option, it is not always necessary. With proper financial planning and debt relief strategies, you may be able to avoid bankruptcy altogether.

The Law Office of John F. O’Grady LLC is a great resource for more information on SBA loans and how they can be discharged in bankruptcy. They have a blog with helpful resources on understanding the implications of filing bankruptcy on an SBA loan.

At the end of the day, the answer to the question “can you file bankruptcy on an SBA EIDL loan?” is yes, but it is important to consider the implications of doing so. It is always best to speak with a lawyer to ensure that you understand the risks and benefits of filing for bankruptcy on an SBA loan.

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Can the EIDL loan be cancelled through bankruptcy?

What are the consequences of filing bankruptcy for my Small Business Administration loan?

Chapter 7 Personal Bankruptcy can typically erase 100% of the liability the business owner has towards the SBA EIDL. On the other hand, Chapter 11 and Chapter 13 Personal Bankruptcy may help to reduce the majority of the debt the entrepreneur is liable for through the SBA EIDL.

If a business closes down, what happens to the EIDL loan?

If you ceased operations and have an EIDL loan balance of less than $25,000, there is not a lot that the Small Business Administration can do to retrieve the debt.

Is it possible to declare bankruptcy after taking out an SBA loan?

In response to this commonly asked question, it is often possible to discharge an SBA guaranteed loan through a Chapter 7 bankruptcy. However, it is important to understand the risks to the SBA business owner, guarantor and obligor associated with this process before making a final determination.