Raleigh Bankruptcy Attorney for Bridge Financing Loan Default

If your bridge financing loan went into default and you don’t have the finances to pay it off, do not hesitate to contact Bradford Law Offices. We might be able to represent you in a bankruptcy case. Filing for bankruptcy could help you pay back what you owe while you continue to run your business.

A bridge loan “bridges the gap” between the funds a business needs and a solution for longer-term financing. You can apply for a bridge loan if you have specific obligations you must meet immediately. Short-term loans often have higher interest rates than long-term loans but offer the temporary cash flow necessary to pay for current business-related expenses.

You must meet the terms of your loan by making regular payments on time and in full. You could be subject to late fees and other penalties if you miss one. If you continue missing scheduled payments, the loan could default, and the lender could take collection action against you.

Although a bridge financial loan can benefit your company, you could face a range of consequences if you don’t pay what you owe. When your bridge loan goes into default, your only option might be to file for bankruptcy. Bankruptcy could give you time to get yourself out of the hole you’re in and place your business on a better path.

The Raleigh business bankruptcy attorneys of Bradford Law Offices are ready to help you with your defaulted bridge loan. You can depend on our legal team to take on the responsibility for your case and guide you through the entire process. We understand your stress while taking on debt you can’t afford to pay. Don’t try to handle your bankruptcy alone. We will help you fight for the future of your business and set you on a better path.

Call us at (919) 758-8879 for a confidential consultation with a business bankruptcy lawyer in Raleigh, NC.

Understanding Bridge Loans

A bridge loan is a loan a business owner can apply for to receive immediate financing for necessary expenses. When the lender approves your application, you receive upfront cash to meet current obligations. Short-term loans like this typically offer terms up to one year. That means you have one year to pay back your borrowed amount, including interest.

As the name implies, a bridge loan bridges the gap between a longer-term loan solution and funds a business needs immediately. You might have already applied for another business loan but need cash now to cover specific costs, such as rent, inventory, and payroll. You can receive the bridge loan to pay these expenses in the interim.

If you default on a bridge loan backed by a personal guarantee, your personal assets could be at risk. A personal guarantee means you receive a loan for your business with the promise to become personally responsible for the debt if you can’t pay back what you owe. If the loan defaults, the creditor could garnish your wages or seize your assets to satisfy your debt.

Bankruptcy Options After Defaulting on a Bridge Financing Loan

Default and delinquency are not the same things. When a loan becomes delinquent, it means you have missed at least one payment. Typically, you can contact your lender and make a payment within the grace period without incurring penalties. Some lenders will charge late fees and other penalties but won’t place your loan in default if you make the necessary payment by the agreed-upon date.

Default occurs once you miss multiple payments or breach other provisions of the loan agreement that are not or cannot be cured. When that happens, your only recourse might be to file for bankruptcy. Three main bankruptcy options are available to businesses that default on a bridge loan.

Chapter 7 Bankruptcy

Chapter 7 bankruptcy is one common form of bankruptcy individuals and businesses choose. Also known as liquidation bankruptcy, Chapter 7 requires you to liquidate your assets to repay your debt. When you file, a trustee appointed by the court will review your case to determine which assets they can sell to cover what you owe.

Individuals with primarily consumer debt must take a means test to determine whether they are eligible for Chapter 7. The means test compares the total amount of debt you have to your income. If your debt is higher than your income, you could qualify because you don’t have the finances to pay your liabilities. However, if your income exceeds your total debt, you’re less likely to qualify. Businesses are not subject to the means test and are entitled to file for Chapter 7 relief if they wish to liquidate.

When you file for Chapter 7, an automatic stay goes into effect. That means creditors can’t pursue action against you. They’re not allowed to garnish your wages, file a lawsuit, or take any other action to receive payment for the debt you incurred.

Typically, filing for Chapter 7 bankruptcy as a business means you must terminate operations. You should only choose this option if you’re ready to close the doors to your business. Selling your assets might mean you can no longer serve your customers. Many business owners sell vehicles, equipment, and other property vital to operations. Without them, you can’t keep your company afloat.

Chapter 13 Bankruptcy

If you operate your business as a sole proprietorship, you could file for Chapter 13 bankruptcy. Under Chapter 13, you could keep your business running. This is a good option for sole proprietorships that don’t qualify for Chapter 7. This form of bankruptcy is eligible for specific types of debt up to a maximum amount.

You can reorganize the amount of money you owe into monthly payments to the creditor. Instead of making a lump-sum payment, you can pay back your debt over three to five years, depending on the terms of your repayment plan.

Chapter 11 Bankruptcy

You can reorganize your business debt by filing for Chapter 11 bankruptcy. This type of bankruptcy is also called reorganization bankruptcy. You can submit a repayment plan to the court for review when you file. If the court and your creditors approve your plan, you can make monthly payments for two to five years until you pay off what you owe to the creditors.

Chapter 11 also issues an automatic stay upon filing. Creditors can’t contact you about the money you owe them or try to recover the debt by repossessing equipment or vehicles or garnishing certain funds. As long as the bankruptcy court and lenders agree to the terms of your repayment plan, you won’t have to make an upfront payment of the total amount. You can make smaller monthly payments until you satisfy the unpaid bridge loan.

How to File for Bankruptcy for Bridge Loan Debt

If you can’t afford to pay off your bridge financing loan, filing for bankruptcy might be the right solution to resolve your debt and get your business back on track. Depending on the type you choose, you might be able to keep your business open while paying off what you owe. Filing for bankruptcy requires following different steps based on the type of bankruptcy you file.

The most crucial step is to hire a bankruptcy lawyer. Bradford Law Offices can represent you in your bankruptcy case and handle each step on your behalf. The process can be complicated and confusing. Many people struggle to determine whether they’re eligible. Gathering the necessary documentation to provide to the court can be a challenge. Having a lawyer on your side can help.

When you file for Chapter 7 bankruptcy, you must follow the steps below:

  • Take the means test to determine whether your income and debt make you eligible
  • Create a list of all creditors and the total amount of debt for each, income, assets, expenditures, and liabilities
  • Create a statement of financial affairs
  • File a bankruptcy petition with supporting documents
  • A court-appointed trustee will review the documentation to determine the assets they can sell to offset your debt
  • Provide the trustee with copies of your tax returns and other documents for review

Chapter 11 bankruptcy requires most of the steps above. Instead of a trustee selling your assets, you must provide the court with a repayment plan to review. Once the court approves it, you can make the scheduled monthly or quarterly payments until you pay off the often reduced amount provided for in your plan.

Contact Us

Bradford Law Offices has successfully represented businesses in Raleigh since 1996. We understand the ins and outs of bankruptcy cases and state law. Defaulting on a bridge financing loan can lead to severe financial strain. You might worry about the consequences you face if you can’t afford to pay off your debt. We know the negative implications it can have on your business and daily operations.

You can count on an experienced and knowledgeable Raleigh bankruptcy lawyer for bridge financing loan default to provide the legal guidance and services you need. When you hire us, we will review the circumstances of your case to determine whether filing for bankruptcy is right for you. We will try to resolve your financial problems to help your business thrive and remain by your side until the end.

If you face bridge loan debt or legal action from a lender, contact Bradford Law Offices immediately. You can reach out to us online or call (919) 758-8879 for a confidential consultation with a trusted bankruptcy attorney in Raleigh, NC.

Written By: Danny Bradford Last Updated: March 7, 2023