Business Bankruptcy for EIDL Loans in the New Year
During the COVID-19 pandemic, the US Small Business Administration (SBA) offered various funding options for small businesses in South Florida and throughout the country to help those businesses stay afloat during in-person business closures and a general downturn. Some of the funding came in the form of grants that did not need to be repaid if certain conditions were met. Other forms of funding, however, including loans provided through the Economic Injury Disaster Loan (EIDL) program, required repayment. These loans were designed to be “used for working capital and other normal operating expenses,” according to the SBA, and the sizes of the loans varied widely. For larger loans, personal guarantees were required.
The EIDL program stopped taking new loan applications in 2022, but most businesses did not need to plan on beginning repayment until 2025 due to deferments. Since EIDL loans have come due, however, many businesses in the West Palm Beach area and throughout South Florida are having difficulty making these payments. If your business is in this situation but you do not want to have to close and liquidate your business, a reorganization bankruptcy may be the logical next step for your business in the new year. Our West Palm Beach bankruptcy attorneys can explain in more detail.
How Reorganization Bankruptcies Can Help Businesses Struggling with EIDL Loans
If your business is struggling to repay its EIDL loan, how can a reorganization bankruptcy help? Rather than requiring your business to shut down and liquidate (as is required in a Chapter 7 bankruptcy), a reorganization bankruptcy can allow your business to remain open and operational while restructuring debt and repaying creditors over time. Reorganization bankruptcies involve the creation of repayment plans that are approved by the bankruptcy court.
During the terms of the repayment plan (which typically last from six months up to multiple years), the business will repay secured and priority debt, but it can be eligible to have remaining nonpriority unsecured debts discharged. EIDL loans can be part of that debt restructuring process.
Types of Reorganization Bankruptcies for Businesses to Consider
There are multiple types of reorganization bankruptcies that businesses may be eligible to file, including:
- Chapter 11 bankruptcy;
- Subchapter V for small businesses; and
- Chapter 13 for sole proprietorships.
It is important to discuss the structure of your business and its eligibility for one of the above types of bankruptcy with an attorney who can assist you.
Contact Our West Palm Beach Bankruptcy Attorney for Assistance
If your business received an EIDL loan during the pandemic that it is now having difficulty repaying, it may be possible to restructure your business’s debt by filing for a traditional Chapter 11 or Subchapter V bankruptcy. One of the experienced West Palm Beach bankruptcy lawyers at Kelley Kaplan Delaney & Eller, PLLC can speak with you today about the details of your EIDL loan and your business’s financial circumstances, and we can provide you with more information about your business’s eligibility for different forms of reorganization bankruptcy. Once your business is ready to file, we can represent your business in all aspects of your bankruptcy case. Contact our firm today for more information about the bankruptcy services we provide to small businesses in South Florida.
Sources:
news.bloomberglaw.com/bankruptcy-law/covid-loans-that-boosted-businesses-now-push-them-to-bankruptcy
sba.gov/funding-programs/loans/covid-19-relief-options/eidl
law.cornell.edu/uscode/text/11
