Can a Business Loan be Forgiven if the Business Fails?
Discover key factors regarding business loan repayment obligations after a business failure. Explore SBA loan forgiveness options and consult with Protect Law Group.
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
No Affiliation or Endorsement by any Federal Agency
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.
The clients are personally guaranteed an SBA 7(a) loan. The SBA referred the debt to the Department of Treasury, which was seeking payment of $487,981 from our clients. We initially filed a Cross-Servicing Dispute, which was denied. As a result, we filed an Appeals Petition with the SBA Office of Hearings and Appeals asserting legal defenses and supporting evidence uncovered during the discovery and investigation phase of our services. Ultimately, the SBA settled the debt for $25,000 - saving our clients approximately $462,981.
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.
The client personally guaranteed an SBA 504 loan balance of $375,000. Debt had been cross-referred to the Treasury at the time we got involved with the case. We successfully had debt recalled to the SBA where we then presented an SBA OIC that was accepted for $58,000.
Yes, as long as you meet the criteria above individuals may avail themselves of Subchapter V.
Most SBA loans fall under two categories: 7(a) and 504.In an SBA 7(a) transaction, a loan is secured from a private sector lender and, provided that the lender and borrower have satisfied the requirements of the SBA, if the borrower defaults on the loan, the SBA will reimburse the lender for a percentage on the loan loss (usually 75% or 85%, depending on various factors).In an SBA 504 transaction, typically, a loan is secured from a private sector lender with a first position lien covering up to 50% of the project cost, and a second loan is secured from a private sector lender with a junior lien position covering up to 40% of the project cost, and the borrower makes a contribution of equity equal to at least 10% of the project cost. After the closing of the first and second loans, and provided that the lender and borrower have complied with the requirements of the SBA, a debenture is sold to investors, the proceeds of which pays off the second loan, whereupon the second loan is assigned to a Certified Development Company (“CDC”) and then to the SBA, which provides a 100% guarantee of the debenture.The existence of the SBA’s guarantee in each of these transactions is an inducement for the lender to make a loan on terms it would otherwise not make. However, the SBA guarantee does not allow the lender to disregard standard commercial underwriting principles such as collateral and personal guarantees. The SBA guarantee does allow the lender to loan more money, extend longer terms, and approve loans to less mature businesses than it otherwise would.The SBA’s purpose under these financing programs is to help businesses gain more access to capital, thereby creating jobs and expanding the tax base. Pursuant to the Small Business Jobs Act of 2010 (“2010 Act”), the maximum SBA guarantee to the lender on a 7(a) loan was increased to $5,000,000; and on a 504 Loan, the maximum debenture amount was increased to $5,000,000.
Under the Federal Statute of Limitations Act (28 U.S.C. 2415(a)), an action by the Government to recover upon a contract for money damages is barred unless filed within 6 years from the date the cause of action accrued. The date of the accrual of the cause of action may be subject to various interpretations. However, in the event of partial payment or written acknowledgement of the debt, the cause of action again accrues at the time of the partial payment or acknowledgement. 28 U.S.C.A. § 2415(a).
Subchapter V debtors must file their reorganization plan within 90 days of entering bankruptcy.
If the debtor cannot commit to a reorganization plan within 90 days, the debtor may file an extension plea. The bankruptcy court decides on whether to approve or deny the extension plea.
Approval of the plan will depend on whether any creditors object and the court's own calendar.
To determine if an SBA OIC is possible the following information must be provided;• A completed and signed SBA Form 1150 Offer in Compromise which outlines the terms of the offer and why the offer is being made. Be sure to address all the items on the forms “Instructions for Presenting the Offer” and “Elements of a Workable Compromise Offer.” You should also discuss the settlement arrangements that are being made with other creditors.• All offeror(s) must complete and sign an SBA Form 770 Financial Statement of Debtor and provide copies of the most recent two years of personal IRS Tax returns (or a copy of the Extension if not filed). The SBA Form 770 will be reviewed and compared with the original SBA Form 413 “Personal Financial Statement” completed at the time of loan approval. Valuations of property subject to judgment must be supported.• Copy of a current paystub if you are employed.• Additional information may be necessary depending on the individual circumstances of the transaction.
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