During the Pandemic, lots of businesses borrowed money from the U.S. Small Business Administration (SBA) to stay in business. Small loans below $25,000 didn't need any security, but larger loans needed businesses to give something valuable as a guarantee.
If a business borrowed more than $200,000, the SBA required someone to personally guarantee the loan. This means that the person guaranteeing the loan and the business itself are responsible for paying it back. If the business closes, that often leaves the individual responsible or some might say on the hook. In 2023, these loans started coming due, and many businesses are finding it hard to repay them, even though the interest rate is low.
If a business or individual can't repay an SBA loan and has to declare bankruptcy, it's possible to discharge the loan in most cases. SBA loans are treated the same way as other debts in bankruptcy. Most businesses took out SBA loans with the intention of saving their business and repaying them. Unfortunately, because of the ongoing economic crisis and high inflation, many businesses are unable to repay these loans. If this is the case, it shouldn't be a problem to discharge the debt in bankruptcy.
At the Law Office of Michael Primus, we have helped hundreds of clients get out of debt, stop wage garnishments, and start fresh through bankruptcy. If you live in Northern California and have debt problems, contact us for a free phone consultation.