SBA Loan Default

[jpd68]

What is the name of your state (only U.S. law)? FL

I had taken an SBA backed loan to purchase a business. The business has not performed as expected and repaying the loan has become extremely difficult.

What approach should I take in trying to lessen the burden of the loan? Would a personal bankruptcy relieve us from our personal guarantee and help protect some of our assets?

I would like to do my very best to repay without getting totally wiped out.

Also, would it be advisable to work with a SBA debt reduction consultant? Anyone have any experience, good or bad with them?

 

[Antigone*]

What is the name of your state (only U.S. law)? FL

I had taken an SBA backed loan to purchase a business. The business has not performed as expected and repaying the loan has become extremely difficult.

What approach should I take in trying to lessen the burden of the loan? Would a personal bankruptcy relieve us from our personal guarantee and help protect some of our assets?

I would like to do my very best to repay without getting totally wiped out.

Also, would it be advisable to work with a SBA debt reduction consultant? Anyone have any experience, good or bad with them?

You should call the CDC or the SBA directly and explain your circumstances to them.

If I recall correctly, SBA loans are not dischargeable in BK.

 

[bigun]

SBA loans may be discharged in bk.
The problem is, if you pledged real estate or other assets as collateral for the loan then, the lender has a security interest in that asset and may be able to claim it in the event of default or bk.
Most bk lawyers give free or lowcost initial consultations. Speak with a few and get all of your options explained.

 

[Jason Milleisen]

There is an alternative to bankruptcy...you can try to settle the debt. The SBA has a process, known as the Offer In Compromise, whereby they will consider a settlement of the debt if the borrower/guarntors lack the ability to repay the debt in full. While bankruptcy is an option, it's not the oly option, and certainly not always the best options.

As I always tell my clients, you should investigate both alternatives (both BK and the OIC) then make an informed decision. In many cases, I have clients settling for pennies on the dollar with no adverse credit impacts.