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EIDL SBA Loans and Bankruptcy: A Path to Financial Recovery in California

EIDL SBA Loans and Bankruptcy: A Path to Financial Recovery in California

The pandemic has had a significant impact on small businesses, leading many to take out Small Business Administration (SBA) loans to stay afloat. Attorney Omar Zambrano, who offers free consultations at 626-338-5505, provides insights on how these loans interact with bankruptcy proceedings in California.

SBA Loans and Bankruptcy

SBA loans, including the Economic Injury Disaster Loans (EIDL) issued during the pandemic, are a common source of funding for small businesses. However, as these loans start to come due, many businesses are struggling to meet their repayment obligations. This has led to an increase in bankruptcy filings involving these loans.

However, the SBA has the right to request an accounting of how the funds were used. While this is not currently a common occurrence, it is essential to be prepared for this possibility. Keep all bank statements and other documents showing how the funds were dispersed.

Personal Liability and Business Debt

Filing for personal bankruptcy can discharge your personal liability for business debts, including SBA loans. However, it does not discharge the business's debt. If your business co-signs a loan and continues to operate and generate revenue, it remains liable for the debt. This is a crucial distinction to understand.

If your business is struggling financially, you may need to consider whether it is salvageable. In many cases, it may be best to close the struggling business and start fresh.

If you are a small business owner in California struggling with SBA loans or other debts, don't hesitate to reach out to attorney Omar Zambrano at 626-338-5505 for a free consultation. He can help you understand your options and guide you through the bankruptcy process if it is the best option for you. Remember, bankruptcy is a legal tool designed to help individuals and businesses get out of debt and get a fresh start.

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