EIDL Is Dischargeable
Despite myths, EIDL loans ARE dischargeable. They are not student loans, tax debts, or criminal fines. The same discharge rules that apply to credit cards apply to EIDL.
The Fraud Exception
If you obtained EIDL through fraud (false statements, unauthorized use of funds), the SBA could argue nondischargeability under 11 U.S.C. 523(a)(2). They must file an adversary proceeding and prove fraud.
Timing Considerations
No waiting period to file. But filing very soon after a large disbursement could raise flags. Keep records of how funds were used -- this is your defense.
Frequently Asked Questions
Will the SBA object to discharge?
Rarely, unless there is evidence of fraud. If your application was truthful and funds used legitimately, they are unlikely to object.
Can the SBA file a claim?
Yes. The claim is paid from available assets (Ch.7) or through the plan (Ch.13/Subchapter V). Any remainder is discharged.
What about the EIDL advance?
The Targeted Advance and Supplemental Advance were grants, not loans. They do not need repayment.
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