SBA loans do not vanish in bankruptcy according to NerdWallet

Small-business owners struggling with rising costs and inflation face hard choices when SBA loan payments fall behind. According to NerdWallet, SBA loans do not automatically go away when a business files for bankruptcy. Even though the federal government backs these loans, they are treated much like other business debts. A common misconception is that SBA loans can never be discharged, but they actually can be depending on the type of bankruptcy. Under Chapter 7 liquidation, the business shuts down and assets are sold off to repay creditors. If your loan is unsecured, the remaining balance can often be erased. If the loan is secured by equipment or real estate, that collateral must usually be given up. Personal guarantees complicate the process further. If you signed a personal guarantee, the SBA can still pursue you for any unpaid balance after the business files. You would then need to file for personal bankruptcy to discharge that debt. If the debt remains unpaid, the SBA may send it to the Treasury Department. That means the government can garnish your wages, withhold tax refunds or seize benefits to recover What you owe. A Chapter 11 bankruptcy allows a business to stay open while reorganizing debts under a court plan. The SBA or lender will not seize collateral as long as you follow the approved payment plan. Chapter 13 bankruptcy lets sole proprietors set up a three-year to five-year repayment plan for business debt. Check your loan terms before making any moves.