If You Owe More than $30,000 Contact us for a Free Case Evaluation at: (833) 428-0933

Bankruptcy and SBA Loans


Chapter 7 or Chapter 11 Subchapter V Bankruptcy for SBA Loans and Guarantors in California

Can I Obtain a Discharge of My SBA Loan?


A Chapter 7 Bankruptcy Can:

  • Eliminate your personal obligation for a defaulted SBA loan
  • Discharge other unsecured debts like credit cards
  • Provide you with a financial fresh start in unprecedented economic times due to the coronavirus

I’ve Defaulted on My SBA Loan

The COVID-19 pandemic has created massive economic upheaval.  Even with government stimulus and deferments, you may find your business unsustainable.  Many businesses have already closed due to the coronavirus.  But you signed a personal guarantee agreeing to pay the loan personally if the business fails.  As such, the lender or the government can seek repayment from you directly.  This may include filing a lawsuit by the lender or administrative remedies by the government such as administrative wage garnishment.

Can Chapter 7 Bankruptcy Discharge My Personal Obligation on the SBA Loan If I Live in the San Diego, Orange, or Los Angeles Counties?

If you live in Southern California – San Diego, Orange, or Los Angeles Counties, Chapter 7 bankruptcy may eliminate the SBA loan obligation and stop any lawsuit or other collection activity.  You may have other resolution options, such as an offer in compromise or another structured workout. However, if you are not eligible for an offer in compromise or you have multiple delinquent unsecured debts, Chapter 7 bankruptcy may offer better relief for your situation.  The SBA loan guarantee is be treated like any other unsecured debt and, therefore, subject to discharge.  This means you do not have to pay the debt.

What If I Pledged My House as Collateral?

If, however, you pledged personal assets such as your house or other real estate, Chapter 7 bankruptcy becomes a less desirable option – especially if there is sufficient equity.  Bankruptcy might not remove the lien on your house and the lender or SBA can still foreclose if sufficient equity is available for the taking.  If you pledged your home as collateral, a Release of Lien for Consideration or a Chapter 11 Subchapter V might be a more viable option depending on your unique circumstances.

Chapter 11 Subchapter V Bankruptcy

The Small Business Reorganization Act of 2019 (SBRA) – which was signed into law last August 2019 and took effect on February 19th, 2020 – marks a significant change in bankruptcy law for small businesses in severe financial distress. The SBRA adds a new subchapter V to Chapter 11, with the goal of easing the complexities and costs of small business bankruptcies. We can help small business debtors take advantage of the new streamlined Chapter 11 procedures – especially in this COVID-19 economic climate.  We can provide advice and counsel, and if hired, execute on the following categories and phases:

  1. Subchapter V Overview: Legislative Goals and Notable Differences
  2. Which Small Businesses Qualify as “Small Business Debtors”?
  3. Procedures for Opting In
  4. SBRA Case Timeline: Expedited Deadlines and Extensions
  5. Standing Trustee: Appointment, Role, Duties and Power
  6. Debtor-in-Possession: Role, Duties and Power
  7. Plan of Reorganization: Who Can File and What Should it Include?
  8. Plan Confirmation Requirements
  9. Creditor Involvement and Treatment of Secured Claims
  10. Requirements for Retaining Equity in the Business
  11. “Disposable Income” for Small Business Debtors
  12. What Falls Within the Property of the Estate?
  13. Plan Modification
  14. Administrative Expenses
  15. Discharge: Timeframe, Effect and Exceptions

Contact Protect Law Group Today for a Free 30 Minute Consultation at 1-888-756-9969

Protect Law Group can provide the experienced legal representation you need in Chapter 7 or Chapter 11 Subchapter V bankruptcy matters.  If you live in the San Diego, Orange, or Los Angeles Counties, California and have a defaulted SBA loan, contact Protect Law Group today for a Case Evaluation.


(833) 428-0934

We are here to help you with your SBA loan problems.

If you owe more than $30,000, call our experienced attorneys at (833) 428-0933 anytime for a Free Case Evaluation