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  1. #1
    Join Date
    May 2006

    Defaulting on SBA loan.

    What is the name of your state? FLORIDA

    We own a business in Florida which has fallen on severely hard times following two devastating hurricane seasons in 2004 and 2005. The business has stopped growing (amount of new business coming is minimal). We continue to amass debt to keep the business afloat and meet our monthly creditor obligations. We have not been able to take any cash out of the business (not even a nominal salary).

    We are carrying an SBA loan for $135K and approximately $60K in credit card debt on numerous cards (mostly for monthly vendor bills & other business related expenses). Even though we are incorporated, we have had to personally guarantee the SBA loan and all of the outstanding credit card debt. Because of the negative cash flow and the stagnant past two year sales history, we have not been able to get a broker to list the business for sale.

    We are at the point of considering both business and personal bankruptcy as the last option remaining.

    Can the SBA loan guarantee be wiped clean with bankruptcy filing? Is there a form of bankruptcy in Florida that will wipe away the entire SBA loan debt?

    Lastly, are my home and IRA account protected when filing bankruptcy on Florida?

    Any advice will be greatly appreciated.What is the name of your state?

  2. #2
    The SBA loan cannot be wiped out in bankruptcy. Because of your personal guarantee, you will probably have to do a personal bankruptcy. Never, never, never do a personal guarantee. It defeats the purpose of your corporation, which is proptection of your personal assets. Part of your IRA may be exempted by a personal exemption in bankruptcy court. I understand that your entire home may be exempt in Florida, but I do not practice in Florida, so I am not sure of this.

  3. #3
    Join Date
    Jun 2006

    Question regarding same thing..

    I am in Minnesota and experiencing the exact same issue as Web Dunn. We have a personally guaranteed SBA loan on two businesses (one will probably sell and breakeven) with one business that may go bankrupt and leave us with a remaining 225,000 dollar sba loan after assets to repay, plus a business credit line of 65k used up. Unfortunately, the franchise we entered required specific financing through an SBA program, therefore, we were required to personally guarantee. My wife and I had to do the following:
    -collateralize an insurance policy for my mother with a $75k surrender value
    -collateralize my house with $70k in equity
    -collateralize my momís house valued at a paid off amount of $250k
    -we both currently make about $110k in salary combined (we had to take full time jobs to avoid further debt from businesses) and figure that with all living standards we would like to have after bankruptcy, we would have a yearly expense (pretax) of about $92k, therefore, an 18k surplus (pretax) per year.

    My questions: I would like to know what happens further in this situation if we do file for bankruptcy, what we would have to surrender/give up, pay back etc. When does the govít pay their guaranteed amt to the bank? Can we escape with some of our debt wiped away? Are the insurance policies and houses safe? What are the repercussions of filing for personal bankruptcy in this case? Is it just a matter of not being able to really buy anything ďbigĒ or get loans for the 7 year waiting period?

    Thank you so much!

    ~Nervous and Frustrated in MN

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