Many small business owners got EIDL (Economic Injury Disaster Loans) during COVID. Many of those people are unable to repay those loans, especially the larger ones. These loans were administered through the Small Business Administration (SBA), and the SBA is now coming after people to repay these loans. Many of these business owners are now considering bankruptcy to discharge the debts for these loans.
EIDL loans, like all other SBA loans, are dischargeable in bankruptcy. However, that discharge is also subject to the same exceptions as other debts. The main exception to discharge is fraud, and that is a big issue with the EIDL loans. These loans were explicitly and specifically for the purpose of keeping businesses open and retaining employees, but a lot of people used the money from these loans for personal purposes. If the SBA objects to discharging the debt for a loan because the business owner used the money for anything but the business, and the SBA can prove that in bankruptcy court, the debt for the loan will not be discharged. This has become such a big issue that bankruptcy attorneys like me are now attending seminars on it.
If you have an EIDL loan that you cannot repay, contact a bankruptcy attorney today. We can analyze whether bankruptcy will discharge this debt.