【破产法】HOW TO DETERMINE IF YOU ARE PERSONALLY LIABLE ON THE SBA LOAN FOR YOUR BUSINESS | 杨清泉律师

Quite a number of small businesses obtained SBA loans to continue operating during the pandemic. Many clients have $50K to $500K of SBA loans for their small business. It’s easy enough to file bankruptcy liquidation for the small business especially when the business is no longer able to pay for warehousing rent which is significant. Normally, the owner of the business guarantees the rent so he does everything within reason to update the rent to avoid a lawsuit against him as an individual to collect rent, but unfortunately, when times are not good, it’s not easy to come up with $20K to pay rent. So some business owners, who still have some money left, are able to truck the inventory out of the big warehouse and transfer them to another smaller warehouse where rent is a lot lower than $20K, and just declare bankruptcy for the business that’s losing money. This does have some complications but let’s not get into them right now. 

SBA LOAN FOR THE BUSINESS OBTAINED DURING PANDEMIC

Going back to the SBA loan obtained during the pandemic. The problem is that business has not gotten back to pre-pandemic levels but the business is now saddled with additional burden of paying off the SBA loan and higher overhead. So less revenues coming in but, a lot more expenses going out means of course it’s a money losing situation for the owners who have to cover the difference from their own pockets. Owners often resort to using their personal credit cards to finance the business loss. Thus, not only is the business saddles with too much debt, the personal debt of the owner keeps on increasing monthly so his or her own personal overhead is also going up while income remains stagnant or decreasing. President Biden says the economy is doing great, but many small businesses that survived the pandemic with SBA loans are encountering hardship.

MANY BUSINESS OWNERS INCLINED TO DECLARE BANKRUPTCY

FOR THE BUSINESS AFTER PANDEMIC

Many owners of small business are inclined to throw in the towel and declare bankruptcy for the business because the businesses are not able to pay back the SBA loans. A bankruptcy filing formally informs the SBA that the business is no longer viable and cannot continue operating. The businesses cannot repay the SBA. The bankruptcy filing also informs all creditors to file their claims in the bankruptcy case and await the trustee’s findings on the assets of the business, if any are available for distribution to creditors. Creditors who are about to file collection lawsuits against the business have a period of time to file their claims in the bankruptcy case instead of wasting more money suing. The business bankruptcy also saves money for the business owners by avoiding litigation expenses to defend themselves in case creditors decide to argue that they are personally liable for the business loan for some reason. Some allegations are absurd claiming fraud by the business owner to make them personally liable.

JOINT AND SEVERAL AND/OR PERSONAL GUARANTY OF BUSINESS LOAN BY BUSINESS OWNER

So how can the SBA hold the business owner personally liable for its loan to the business? Firstly, examine what you signed with the SBA. Do the words JOINT AND SEVERAL appear where you sign on the dotted line? If you signed as JOINT AND SEVERAL, you are on the hook for personal liability despite the business being a corporation or LLC. JOINT AND SEVERAL means that you as an individual are jointly and equally liable with the corporation or the LLC for the SBA loan. This means the SBA can collect against you or the business, the full amount of the loan extended. Secondly, check the loan documents to see if you signed a personal guaranty. If you did, then you are also on the hook for the SBA loan as an individual guarantor. It’s unusual that the SBA also holds the home of the business owner by way of a mortgage or trust deed to secure the loan. But I have seen several business owners who have given their homes the secure the SBA loan, very, very bad mistake. If it’s just a JOINT AND SEVERAL and/or personal guaranty the business owner can opt for Chapter 13 if the equity in the home is not more than $680,000 in LA county (fair market value less outstanding balance of trust deed/s on the house) and pay a small portion of the SBA loan and other loans of the business provided total debt secured and unsecured are within certain limits, or Chapter 7 fresh start discharging all debts.

NO NEED TO REFINANCE OR SELL YOUR HOME TO PAY OFF SBA IN MANY CASES

There’s no need to refinance your home to pay off the SBA, or the sell your home to pay off the SBA. Believe it or not, I have met clients who come to see me after they have already refinanced or sold their homes when they could have kept their homes in Chapter 7, or simply pay a very small portion of the SBA loan in Chapter 13. There’s no need to kill a mosquito with a hammer. It’s much better to keep your nice home to fight another day. Your family needs a house over their heads especially now that houses here are so expensive! Sure lose your business, but not your home. Keep your home. You’ll be much happier. One client sold his house and used the net proceeds of $400K to pay creditors then came to see me. If he had not sold the house, I would have just told him to keep the house and do the chapter 7; he would still have the house and the $400K of equity and his wife who left him because he lost their home. If you need debt relief, set an appointment to see me. I will analyze your case personally. Disclaimer: None of the foregoing is considered legal advice for anyone. There is absolutely no attorney client relationship established by reading this article.

PRAYING ALWAYS HELPS

It also helps to pray to our God, His beloved Son, Jesus Christ, and the Blessed Mother Mary for divine protection against financial problems, because we have a God who loves us and His beloved Son, Jesus Christ, showers us with infinite mercy. All we have to do is humble ourselves and pray to the Sacred Heart of Jesus for a drop from his ocean of infinite mercy. Jesus revealed in 1930’s to Saint Maria Faustina Kowalska of Poland that all sinners which we all are and those who do not believe in God and those who do not yet know Jesus, should all be brought to His sacred heart and be submerged in the ocean of His infinite mercy, for the sake of His Sorrowful Passion. Anything you ask for when you pray the chaplet for His divine mercy will be granted, if compatible with His will. Moreover, you are guaranteed a peaceful death. What is the current proof that God and Jesus are divine and all powerful? I refer you to exhibit A, the incorruptible body of Carlo Acutis!

CURRENT ONGOING PHYSICAL PROOF GOD IS ALMIGHTY

INCORRUPTIBLE BODY OF CARLO ACUTIS DIED 2007 AT AGE OF 15

Look at the incorruptible body of the blessed Carlo Acutis who died at 15 in 2007. You can look at his body in Rome, Italy, now 14 years after his death. He looks like he’s just asleep in his jogging suit and rubber shoes! That is a perfect example of an ongoing sign on earth that the God of Moses, our God, my God, is almighty and all-powerful that He even suspends the natural laws of biology and physics without any effort. He resurrected His one and only beloved son from death on the cross. Indeed, He has power over death.

I have actually thought, “What would the other religions believe if they actually saw the incorruptible body of the blessed Carlo Acutis? I think even Buddha, if he were alive today, would truly believe that Yahweh is the one True God.” No need to think about reincarnation and nirvana because his incorruptible body is available for all to see in Rome, Italy. We won’t need any kind of explanation on the efficacy of modern day mummification. Come on, man, that’s all bull. The truth is in plain sight. Believe your own eyes that the one true God is all-powerful and His name is Yahweh, “I am who Am.” He is the alpha and the omega, the beginning and the end.

“ETERNAL FATHER, WE OFFER YOU THE BODY, BLOOD, SOUL AND DIVINITY OF YOUR DEARLY BELOVED SON, JESUS CHRIST, OUR LORD AND SAVIOR, IN ATONEMENT FOR OUR SINS AND THOSE OF THE WHOLE WORLD, FOR THE SAKE OF HIS MOST SORROWFUL PASSION, PLEASE HAVE MERCY ON AMERICA AND THE WHOLE WORLD.”

Lawrence Bautista Yang is a graduate of Georgetown University Law Center and has been in Law practice for thirty years. He

specializes in Bankruptcy, Business and Civil Litigation and has handled more than five thousand successful Bankruptcy cases in

California. He speaks Mandarin and Fujian and looks forward to discussing your case with you personally.

Please call (626) 284-1142 for an appointment

at 20274 Carrey Road, Walnut, CA 91789 or 1000 S Fremont Ave., Mailstop 58, Building A-10 South Suite 10042, Alhambra, CA 91803.