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cfortunato, Attorney
Category: Bankruptcy Law
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Experience:  Bankruptcy professor.
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With an SBA express loan does the Government guarantee portion

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With an SBA express loan does the Government guarantee portion stay attached to the borrower even through bankruptcy?
Hi JACustomer,
1) Are you asking if the government remains liable for the loan if the recipient files a Bankruptcy?
If so, is this regarding a personal or a business Bankrutpcy?
2) Was the SBA loan personally guaranteed?
3) What form is the business (corporation, LLC, etc)?
Customer: replied 5 years ago.

I have a business and I am considering applying for an SBA Express loan to use as a Line of Credit for operating expenses. I have been told that if I were to default through bankruptcy that the amount owed on the SBA express if there was any would stay with me and I would still have to pay it back. Not unlike an IRS judgement on taxes.

Customer: replied 5 years ago.

I have a business and I am considering applying for an SBA Express loan to use as a Line of Credit for operating expenses. I have been told that if I were to default through bankruptcy that the amount owed on the SBA express if there was any would stay with me and I would still have to pay it back. Not unlike an IRS judgement on taxes.

 

The corporation is an S corp and it is personally guranteed with my signature and business assests.

Who told you an SBA loan is not dischargable in a Bankruptcy?

Customer: replied 5 years ago.
The Lender that is proposing the loan. The default would be a business default secured by inventory that in the event of default may or may not have value to it and guaranteed with my signature.

There are no exceptions to discharge for SBA loans, and SBA loans are not treated similarly to taxes.

This means that if you file a personal Bankrutpcy, your personal liability for the loan will be discharged, but your business liability for the loan will remain (unless you also file a business Bankruptcy).

 

I think this is what you wanted to know. If not, please let me know.

Thank you.

 

Customer: replied 5 years ago.

I was concerned about the business filing bankruptcy. So to clairify, if the business files bankruptcy then the loan will be discharged?

If the business files a Bankruptcy, the business will no longer be liable for the loan, but you will remain personally liable for the loan - even if the business files a Bankruptcy - unless you also file a personal Bankruptcy.

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