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Capital One sba loan in chapter 7??

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  • Capital One sba loan in chapter 7??

    Hi! So I am a sole proprietor business owner who filed chapter 7 about 3 weeks ago. I have an sba loan with Capital One that I used to consolidate some debt (about 2 years ago).

    Here is my problem, they keep sending me statements and when I call them they say they have all the bankruptcy info but they say business debt cannot be discharged in chapter 7, that I have to file a chapter 11?? I was told by my attorney that with sole proprietor that business debt is counted as personal debt in chapter 7.

    Has anyone else had this problem?? Thanks

  • #2
    Both Cap 1 and your attorney are correct.

    Sounds weird, eh?

    Your personal debt to them has been discharged. Possibly, if you truly are a sole proprietor, that is the end of the matter, since sole proprietor means you ARE the business.

    I suspect Cap1 is trying to use the old corporate responsibility avenue. You are sure you are not incorporated, or an LLC?

    Did you ever claim such a thing on the application, or on a website, or even a contract?

    I think they are blowing smoke, but there are some concerns:

    If you did any of the above, or if you pledged in any form (look for the very VERY small print) pledged the company, stock, inventory, fixtures, accounts receivable, as collateral.

    Please keep us updated, and I hope others will chime in.

    Btw: I have a scorp and am dealing with the same issue with other creditors ona different level.

    best wishes

    11-20-09-- Filed Chapter 7
    12-23-09-- 341 Meeting-Early Christmas Gift?


    • #3
      oh, forgot:

      I am unclear on the dischargeability of SBA loans. That may be a different matter entirely.
      11-20-09-- Filed Chapter 7
      12-23-09-- 341 Meeting-Early Christmas Gift?


      • #4
        Thanks for the input

        I am completely a sole proprietor, and I have never stated to any creditors or anyone that I was an LLC, or any kind of corp, so I think I am fine. Hopefully.

        I have always filed my taxes as SP too, so I don't think they have any grounds to dispute that, since I didn't put I was a corp on the application etc. I know in my business that since I am a SP, if I was ever sued, they could also take my personal things. So I know it does end up personal. I hope I don't have problems with them. I know my attorney said that Capital One is one of the worst to deal with.

        My attorney should take care of it. If you have any other insight I would love the replies, it really helps to hear others experiences as well. Thanks


        • #5
          Cap 1 is just blowing smoke plus added ignorance. Ch 11 is for business enteties which wish to reorganize (akin to CH 13 in personal cases) and have the means to do so. Individuals may also apply for CH 11, but they must be over the limit on either secured/unsecured debts or BOTH! ($336.9K on unsecured and something like over $1M on secured). CH 7 is open to all whether: individuals or business enteties (sole prop, LLP, LLC, S-Corp, C-Corp or whetever!). You atty is correct and if Cap 1 wishes, they can always object by way of an advesarial procedure (AP) which will most probably be thrown out, unless we are talking about a huge sum of money (which I doubt if Cap 1 would ever have had it to begin with to even lend it to you). Just let them send you statements and you keep sending the copies to your atty.


          • #6

            That is what I thought, thanks! The loan amount is only $11,000, and for a business I wouldn't think that was a large amount.

            I knew they were just trying to stall, so my attorney will have to take care of it. It just got me a little worried when they kept saying that.

            And, good luck to everyone else going through this horrible thing called bankrutcy. I wish it wasn't a necessity, but it is. I just wish I would have done it a year ago before I took a 401k loan to try to help get us out of the hole. It didn't work, but oh well, I guess we are just paying ourselves back anyway.

            Thanks for all the input


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