I have eidl of 740k with personal guarantee. Business closed. No payments made. First payment says due 11/2022. Im assuming that when the time countdown starts for statue of limitations start. Should I try to file BANKRUPTCY to get personal guarantee discharged or wait 2.5 years for statue of limitations expire?
This was the response from one laywer. Is he correct?
Hi there, As someone who works at the intersection of tax, bankruptcy, and forensic accounting, and also wrote a book back in 2020 about the Covid programs and potential outcomes relating to fraud, I see a few issues here, and the bankruptcy question is actually the smaller of the problems on these facts. Chapter 7 is technically available, but the SBA could survive discharge. EIDL rules limit the proceeds to working capital and business operating expenses, so using the money for personal living costs and a car directly contradicts the certifications you signed at application, which supplies the fraud elements the SBA needs to keep the guaranty alive after bankruptcy, and when a debt arises from fraud, all of it survives the bankruptcy, not just the loan principal. The bigger problem is criminal exposure. COVID EIDL was issued under a federally declared disaster, which can carry penalties up to 30 years, plus possible false statements on the loan application you signed. The fact pattern you describe is squarely within the template DOJ and SBA Office of Inspector General have been using for COVID EIDL prosecutions since 2020. Here's the issue: Filing Chapter 7 requires you to disclose the loan and how you spent it under penalty of perjury, which creates a documented admission prosecutors can use. Engage white-collar criminal defense counsel first, bankruptcy counsel second. Best of Luck