What Should You Do If Your Company Cannot Make Its EIDL Payments?
What should businesses in West Palm Beach or elsewhere in South Florida do if they cannot make payments on an Economic Injury Disaster Loan (EIDL) program loan they received during the COVID-19 pandemic? To put that question another way, if your business has an EIDL loan and cannot make payments on that loan because your business is struggling or your business is closing, what are your options? You might be wondering if you can file for Chapter 11 or Chapter 7 bankruptcy, but you also may be wondering if bankruptcy with an EIDL loan could result in personal liability for that loan. You might also be wondering if you have options besides bankruptcy. These are questions and considerations that you should discuss with a Wet Palm Beach bankruptcy attorney. In the meantime, we can provide you with more information about what a business can do if it cannot make payments on its EIDL loan.
What You Should Do If You Cannot Pay and Your Loan is Under $200,000
EIDL loans were given to businesses with the understanding that businesses would repay the loans. Generally speaking, your options will likely depend upon the amount of your EIDL loan and whether there was a personal guarantee attached to your business’s EIDL loan. As an article in Calculated Moves explains, if you do not file for bankruptcy, the SBA could attempt to take possession of business assets to repay debt since EIDL loans are secured loans (unless the loan was under $25,000, in which case it is unsecured, which means that the SBA cannot attempt to take possession of your business’s assets if you do not pay).
If you do not want this to happen, the first thing to consider is whether your loan is over $200,000. If your business has an EIDL loan that is less than $200,000 and you cannot make your payments, business bankruptcy is likely an option for you to handle the debt. With a Chapter 7 bankruptcy, the SBA may be able to be repaid from the liquidation of your business assets, but if you do not have sufficient business assets, then the likely outcome is that your business will close and the SBA will not have an option to recover any remaining debt. In Chapter 7 business bankruptcies, there is no discharge since the business closes and there is no longer a business entity. With a CHapter 11 bankruptcy, you may be able to reorganize your date and make payments for a longer period of time on your EIDL loan.
What You Should Do If You Cannot Pay and Your Loan is Over $200,000
What changes when your business’s EIDL loan is more than $200,000 and you cannot make payments? In these circumstances, the business owner had to provide a personal guarantee. Accordingly, even if your business files for bankruptcy, you will be personally responsible for the debt. At this point, you could consider personal bankruptcy following the business bankruptcy.
Contact a Bankruptcy Lawyer in West Palm Beach
Do you have questions about handling EIDL loan payments when your business cannot pay? It is important to seek advice from an attorney who can assist you. Do not hesitate to get in touch with one of the experienced West Palm Beach bankruptcy lawyers at Kelley, Fulton, Kaplan & Eller to discuss options for handling your EIDL payments.