Help your Clients Get Relief from Personal Guarantees on Business Debt thru the SBRA.
More and More Small Business Owners are struggling with debt not only on their business but personally as well. That’s because almost all small business debt is personally guaranteed by the owners, either on bank loans, or personal credit cards they use to fund and operate the business.
As a result, these Owners, mistakenly believe they are hopelessly trapped because they fear they will not only lose their business, but also their home, their lifestyle and their ability to support their family. So they continue in an ever downward spiral of more loans, excruciating payment schedules on workouts, and a poverty level existence, in an effort to make more payments from less and less cash flow and income in today’s Covid-19 world.
But more of the same will not produce a different result. (Seems like there’s a famous quote about that somewhere) There is a better solution. More courts are ruling that personal guarantees of business debt qualifies an individual to file under the Small Business Reorganization Act (SBRA – 11 U.S.C.1181-1195) And, as long as the court determines that a debtor’s plan is fair and equitable, it can be approved without creditor approval, unlike the standard chapter 11 filing.
Section 101 (51 D) (A) qualifies “a person engaged in commercial or business activity” with not less than 50% of which arose from the Commercial Business activity of the debtor.” (And not more than $7.5 million in secured and unsecured debt), “ Because of the unique structure of SBRA, an individual can eliminate unsupportable debt for himself AND his business while restructuring to operate on a profitable level while maintaining ownership of his business. And, of course, by retaining ownership of his business and his assets; more employees keep their jobs; and government continues to receive revenue, though at a reduced rate.