The response is an emphatic """"NO!""""
Bankruptcy is only necessary in specific circumstances. Many, if not most, instances of default (and the resulting workout) can be managed more effectively, with lower costs and better outcomes for you, the business owner, outside of bankruptcy court.
The key is to have a clear comprehension of what the secured creditors would obtain if the company filed chapter 7 (liquidation) and then determine what the secured creditors would obtain from the borrower if he/she filed personal chapter 7.
When an organization fails, the bank must first liquidate its assets. Typically, they receive pennies on the dollar at the conclusion of this procedure. As a result of the initial borrower's personal guarantee (PG), the company loan does not disappear, but rather becomes personal debt for the original borrower.
But even if the borrower's PG has little or no value, the borrower must address the debt or it can escalate into an unforgiving issue that can lead to wage garnishment, Department of Justice lawsuits, and other undesirable outcomes. When faced with this situation, the majority of individuals believe bankruptcy is the only option. However, the SBA has a procedure known as the Offer In Compromise for resolving delinquent loans.
The Offer in Compromise enables the debtor to submit a settlement proposal to the Small Business Administration. This offer is available as either a one-time payment or a monthly installment plan.
The Offer in Compromise is NOT contingent on the debtor filing for bankruptcy.
In addition, resolving an SBA debt with an Offer In Compromise has NO impact on the borrower's credit score; therefore, it is possible to settle enormous debts for pennies on the dollar with NO IMPACT ON YOUR CREDIT SCORE.
Understanding the process, your bank, and how to present the necessary information in accordance with your bank's and the SBA's requirements is crucial to submitting a successful Offer In Compromise.
" - https://www.affordablecebu.com/
