About $9,300 per month

That is the payment that small businesses that borrowed the max EIDL from the SBA are going to have to start making in May.  If they borrowed that $2,000,000 and have any other debt outstanding, secured, unsecured, trade lines, vendors, credit cards, you may exceed the debt limit for a streamlined, highly advantageous, Sub-Chapter V reorganization after the end of this month.  The CARES act gave everyone an increase in the debt ceiling for these Small Business Reorganizations and increased that ceiling to $7.5 million.  But, by the end of this month that ceiling is falling back to under 3 million.  That means that if you are over the limit after March, and you can’t afford your debt payments, you will have to either liquidate under Chapter 7 or Reorganize under Chapter 11 and be subject to the absolute priority rule.  This means that if you want to KEEP your company, you will have to pay your debts in full.

In addition, since the SBA is a secured creditor, they may elect to retain their lien on your assets until paid in full, but, they cannot come take your assets under a Sub-Chapter V case without the permission of the Court.

However, being secured does not make the SBA debt non-dischargeable.  Moreover, the personal guarantee that had to be given to get the EIDL at the higher levels is also dischargeable in Bankruptcy.  Sub-Chapter V lets you combine your company reorganization and your personal reorganization in one case.

Don’t miss out on the opportunity to shed the extra weight acquired during the Pandemic.  See a Board Certified Bankruptcy Specialist now to avoid missing an important deadline.

This article is written by an attorney at Attorney Donald Wyatt PC. Always consult an attorney before making any legal decisions. To make an appointment today, please click here to contact us.