Q: Filing Chpt.7 BR. Don't know how to answer "are debts primarily consumer or business debts" as is 50/50 with SBA EIDL.
Debt is unsecured debt, HOWEVER, it is equal debt from credit cards and an SBA EIDL loan that is sub-$25k. So basically, I have $25k in CC debt and $25k in SBA EIDL which is for a SOLE-PROP biz.
1) I do not know how to answer the question as to whether I haver primarily consumer debt or primarily business debts. It is literally pretty much 50-50. UNLESS … since it is sole-prop, can it be considered consumer? (doubting it, but just asking).
2) The consumer debt might be slightly more, so could I then honestly choose “primarily consumer debt”? Also, I was thinking I could choose this and also not add the SBA Loan to the creditor matrix for the initial filing, then if need be (after hiring an attorney for example) submit and addendum to the matrix.
One note, the SBA also stopped collection efforts some time ago and there are no pending lawsuits from…I know this is probably wishful thinking but, is it possible they have forgiven (forgotten about? I know, ha-ha) loan?
A: The question of consumer vs. business debt does not really determine anything (just for statistical purposes of how many consumer cases vs. business cases are filed). My recommendation would be to check the consumer box. No, it is not possible that the SBA has forgotten you. And no, you cannot not list it. You must list all of your creditors. One of the boxes you have to check for each creditor is the amount owed, or if you don't know, there is a box for "undetermined." There is no penalty for listing the wrong amount. The important thing is for each creditor to get notice of the bankruptcy. Assuming you eventually get a discharge, the full amount will be discharged, even if you list it for less than what turns out to be owed. If you want to be on the safe side, you can round the amount up to the nearest $100. I hope this helps.
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The key to answering all of the Official Form bankruptcy questions is full disclosure. In our opinion, you can answer either way, but the rest of the questions in your completed forms will answer this question adequately, if full answers are given.
With your intent to file for relief, don't fret about the SBA; disclose your debt to it, without spin. You will learn much more during the course of your bankruptcy about this and probably other claims.
Use a bankruptcy lawyer, with experience, licensed to practice in MD.
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When determining whether debts are primarily consumer or business in nature, especially in a case where it is a close call, it is essential to consider the purpose for which the debts were incurred. For a sole proprietorship, business debts are those incurred with the motive of economic gain or in the course of conducting business. Even if the split is roughly 50/50, you should categorize the debts based on the predominant use of the funds. If consumer debt is slightly more, then you may be able to argue that your debts are primarily consumer.
Regarding the SBA Economic Injury Disaster Loan (EIDL), it is typically considered a business debt since it's intended for business purposes. It is not advisable to exclude any debts from the initial filing; all debts should be disclosed to the court, and any non-disclosure could result in adverse consequences.
Lastly, regarding the SBA loan, the absence of collection efforts does not equate to forgiveness. The SBA EIDL is not likely to be forgiven outside of formal forgiveness procedures, and assuming it has been forgotten could lead to significant legal issues down the line. An attorney can guide you on the proper classification of your debts and the implications for your Chapter 7 Bankruptcy filing.
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