When Your EIDL Becomes a Liability: Don’t Rush Into Bankruptcy
A recent Bloomberg Law article, “Covid Loans That Boosted Businesses Now Push Them to Bankruptcy,” shines a spotlight on a troubling trend: the very pandemic relief meant to sustain small businesses is now contributing to their collapse. Businesses that took EIDL (Economic Injury Disaster Loan) funding, often with generous terms and deferred payments, are now finding themselves overwhelmed by debt obligations as hardship provisions expire.
The article reports that more than 1,800 companies have already listed SBA/EIDL debt in bankruptcy filings this year alone—a record high. Many business owners personally guaranteed these loans, making them individually liable when their businesses can’t keep up. With the end of relief accommodations, the pressure to repay is mounting.
If you or your business is feeling that pressure, you might believe your only option is to file for bankruptcy. But bankruptcy is not always the best—or only—path. And filing without exploring alternatives can lead to unnecessary costs, loss of control, and in some cases, worse outcomes.
Why You Should Contact Us Before Filing
1. Negotiate and restructure your debt
We work directly with lenders, SBA representatives, and creditors to restructure loan terms, create repayment plans, or even settle certain debts.
2. Protect your personal guarantees
If you personally guaranteed a loan, that doesn’t automatically mean you’ll lose everything. We help you understand your exposure and protect what matters most.
3. Preserve your business and your credit
Bankruptcy can stay on your record for years and impact your ability to secure future funding. We explore ways to regain stability without that long-term damage.
4. Act early, while options are still available
Once defaults pile up or lawsuits begin, flexibility disappears. The earlier you reach out, the more tools we have to help.
What To Do Next
- Take stock: List all debts, their terms, guarantors, and creditor names.
- Reach out now: The sooner you talk with us, the more leverage and options we have.
- Get guidance before making irreversible moves: Filing for bankruptcy is a big step. Let’s explore alternatives first.
The Bloomberg article is a strong reminder: the pandemic safety net can turn into a trap when relief programs wind down. But it doesn’t have to end in bankruptcy for you. Call us before making that decision.
Read the full Bloomberg article here (subscription may be required).
