Does a Business Loan Show up on Your Personal Credit Report?
Learn how business loans and SBA loan forgiveness can affect your personal credit with Protect Law Group's expert guidance.
We Provide Nationwide Representation of Small Business Owners, Personal Guarantors, and Federal Debtors with More Than $30,000 in Debt before the SBA and Treasury Department's Bureau of Fiscal Service
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Millions of Dollars in SBA Debts Resolved via Offer in Compromise and Negotiated Repayment Agreements without our Clients filing for Bankruptcy or Facing Home Foreclosure
Millions of Dollars in Treasury Debts Defended Against via AWG Hearings, Treasury Offset Program Resolution, Cross-servicing Disputes, Private Collection Agency Representation, Compromise Offers and Negotiated Repayment Agreements
Our Attorneys are Authorized by the Agency Practice Act to Represent Federal Debtors Nationwide before the SBA, The SBA Office of Hearings and Appeals, the Treasury Department, and the Bureau of Fiscal Service.
Clients borrowed and personally guaranteed an SBA 7(a) loan. Clients defaulted on the SBA loan and were sued in federal district court for breach of contract. The SBA lender demanded the Client pledge several personal real estate properties as collateral to reinstate and secure the defaulted SBA loan. We were subsequently hired to intervene and aggressively defend the lawsuit. After several months of litigation, our attorneys negotiated a reinstatement of the SBA loan and a structured workout that did not involve any liens against the Client's personal real estate holdings.
Client’s small business obtained an SBA 7(a) loan for $750,000. She and her husband signed personal guarantees exposing all of their non-exempt income and assets. With just 18 months left on the maturity date and payment on the remaining balance, the Great Recession of 2008 hit, which ultimately caused the business to fail and default on the loan terms. The 7(a) lender accelerated and sent a demand for full payment of the remaining loan balance. The SBA lender’s note allowed for a default interest rate of about 7% per year. In response to the lender's aggressive collection action, Client's husband filed for Chapter 7 bankruptcy in an attempt to protect against their personal assets. However, his bankruptcy discharge did not relieve the Client's personal guarantee liability for the SBA debt. The SBA lender opted to pursue the SBA 7(a) Guaranty and subsequently assigned the loan and the right to enforce collection against the Client to the SBA. The Client then received the SBA Official 60-Day Notice. After conducting a Case Evaluation with her, she then hired the Firm to respond and negotiate on her behalf with just 34 days left before the impending referral to Treasury. The Client wanted to dispute the SBA’s alleged debt balance as stated in the 60-Day Notice by claiming the 7(a) lender failed to liquidate business collateral in a commercially reasonable manner - which if done properly - proceeds would have paid back the entire debt balance. However, due to time constraints, waivers contained in the SBA loan instruments, including the fact the Client was not able to inspect the SBA's records for investigation purposes before the remaining deadline, Client agreed to submit a Structured Workout for the alleged balance in response to the Official 60-Day Notice as she was not eligible for an Offer in Compromise (OIC) because of equity in non-exempt income and assets. After back and forth negotiations, the SBA Loan Specialist approved the Workout proposal, reducing the Client's purported liability by nearly $142,142.27 in accrued interest, and statutory collection fees. Without the Firm's intervention and subsequent approval of the Workout proposal, the Client's debt amount (with accrued interest, Treasury's statutory collection fee and Treasury's interest based on the Current Value of Funds Rate (CVFR) would have been nearly $291,030.
Small business sole proprietor obtained an SBA COVID-EIDL loan for $500,000. Client defaulted causing SBA to charge-off the loan, accelerate the balance and refer the debt to Treasury's Bureau of Fiscal Service for aggressive collection. Treasury added $180,000 in collection fees totaling $680,000+. Client tried to negotiate with Treasury but was only offered a 3-year or 10-year repayment plan. Client hired the Firm to represent before the SBA, Treasury and a Private Collection Agency. After securing government records through discovery and reviewing them, we filed an Appeals Petition with the SBA Office of Hearings & Appeals (OHA) court challenging the SBA's referral of the debt to Treasury citing a host of purported violations. The Firm was able to negotiate a reinstatement and recall of the loan back to the SBA, participation in the Hardship Accommodation Plan, termination of Treasury's enforced collection and removal of the statutory collection fees.
An SBA Loan Modification is a remedial option when the business is still a viable concern, is still generating revenue and due to current circumstances, the old loan terms just do not make financial sense for all parties. A loan modification package is generally presented when it involves a SBA 504 Loan and the collateral or building’s fair market value has decreased significantly such that the loan should probably be modified (i.e. principal and interest payment terms, modification of principal loan balance to reflect current fair market value appraisal of real estate collateral, payment schedule etc.). In this situation, special factors need to be evaluated, appraisals will need to be conducted, and a proposal should be made in order to apply for a loan modification which benefits both parties. Again, the borrower will be required to provide updated business and personal financial information, additional pledged collateral may be requested, and appraisals will be done as part of the modification process. This is not a situation where the borrower or guarantor should engage in this process without qualified representation or consultation. However, if the business feels that it doesn’t need assistance, we recommend that you review applicable SBA SOPs and the Code of Federal Regulations (CFRs) prior to presenting your loan modification application.
An SBA Offer in Compromise with a “going concern” business is extremely rare and generally the SBA does will not consider this unless settlement arrangements have been made with all other creditors and the business must show it will not be able to operate under its current debt structure.
Chapter 11 of the US bankruptcy code focuses on “reorganizing” a business. This allows it to stay alive while restructuring debt and making a plan to repay creditors over time.
For many struggling businesses, the Chapter 11 Subchapter V is a long-awaited life preserver. A traditional Chapter 11 was extremely expensive for businesses. Businesses hope it eliminates some of the bureaucratic pitfalls of The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA).
The BAPCPA was supposed to make filing for Chapter 11 easier. Instead, it included more reporting requirements and other burdens that bogged down the act and canceled out the benefits.
Subchapter V shares some similarities to the BAPCPA. Both have one-step confirmation, and both add new features that make filing for Chapter 11 easier for small businesses.
Filing fees with the court may vary but as of the time of this writing the filing fees are $1,738.
Attorneys' fees will vary on the complexity of your case but will be in the $15,000 to $25,000 range in most cases.
Under a regular Chapter 11, attorneys' fees were usually a minimum of $50,000.
To be eligible for this option, a debtor must meet the following criteria:
The CARES Act further expanded the eligibility for businesses to qualify under this bankruptcy path.
This legislation increases the eligibility pool to also include companies with up to $7,500,000 in debt (both secured and unsecured) to reorganize under Subchapter V. This is a significant increase from the otherwise limit of $2,725,625.
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