Can an sba loan be "crammed down?"

[sliceopie]

I am a sole proprietor of a franchise and want to keep my business, but sales are slow right now and I'm having a hard time making my payments. I have an sba loan that was used to purchase my business 5 years ago. One attorney told me that he can do a "cram down" on my sba loan and I would only have to pay back the amount equivalent to the "replacement value" of the equipment in my restaraunt the rest would be dropped. I have had other attorneys tell me this is not true. I don't know what to believe. Also, I owe $65,000 in cc debt and am not a homeowner. Any info would be greatly appreciated.

[HHM]

That is an interesting question.

I think you can do so, after all, section 1322(b)(2) does say a plan may "modify the rights of holders of secured claims..."

But, I believe you would be in for a fight. But honestly, I don't know the answer to your question with any degree of certainty.

Did you ask either lawyer to explain their answer?

[justbroke]

Good read HHM. I would only add that the remainder of the valuation of the secured loan, becomes an unsecured loan, and still payable through your Chapter 13 Plan.

Secured debt may be bifurcated (split) into a secured portion and unsecured portion. The key for bifurcation under 506(a) of the code is that the collateral must have been purchased more than one year from the date of filing, or the debt is subject to the so-called "hanging paragraph" of 1325 meaning it can't be bifurcated. I see that the OP's loan was 5 years ago, so he is clear as far as I can see.

A good bankruptcy attorney who deals with small business is what the OP needs. Don't need the "consumer" bankruptcy attorney. They will know the difference between balance sheets and bed sheets!

I'm not an attorney but I'm in a 13 with some of it business debt (as a small business). Mine was primarily CC debt from the business startup.

[sliceopie]

Thanks for the info, it helps.