Legal Considerations for Small Business Owners
Empower your small business with expert legal guidance from the SBA attorneys at Protect Law Group. Learn more about legal considerations today!
A settlement or judgement in a divorce does not absolve your client of liability on a defaulted SBA loan. Don't leave your client on the hook.
Book a Consultation CallThe common situation exists where a husband and wife co-own a business and obtain an SBA backed loan. Both parties sign a personal guarantee. Some time later the marriage fails and the parties split. However, as part of a settlement or judgement, one party takes over the business and remains responsible for the SBA loan.
The common mistake is assuming that because the marital settlement or divorce judgement states that one party is responsible for the SBA loan that the other spouse is absolved from liability. However, unless you have obtained a release from the personal guarantee, the personal guarantee remains in effect as to your client.
More importantly, the federal government does not care what the settlement or judgement says. Your client can seek indemnity form his or her former spouse as far as the SBA cares. This means, for example, if your client and his or her spouse obtained a $500,000 SBA loan, and your client's ex-spouse thereafter takes over the business and responsibility for the loan and defaults - your client remains on the hook for the $500,000 loan because he or she signed a personal guarantee.
Your client can either pay the debt or risk submission to collection actions by the federal government. Collection can include a myriad of tools including filing a law suit, foreclosure, administrative wage garnishment, federal benefit or salary offset and tax refund offset. Your client may seek indemnity from his or her ex-spouse as a remedy, but while that process proceeds ... the government commences collection.
Protect Law Group provides assertive representation of clients fighting the SBA and collection by the federal government. Your client may settle his or her SBA debt with experienced legal representation. Better yet, move in front of the problem and contact Protect Law Group to help release your client from the personal guarantee.
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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 obtained an SBA 7(a) loan for their small business in the amount of $298,000. They pledged their primary residence and personal guarantees as direct collateral for the loan. The business failed, the lender was paid the 7(a) guaranty money and the debt was assigned to the SBA. Clients received the Official 60-Day Notice giving them a couple of options to resolve the debt balance directly with the SBA before referral to Treasury's Bureau of Fiscal Service. The risk of referral to Treasury would add nearly $95,000 to the SBA principal loan balance. With the default interest rate at 7.5%, the amount of money to pay toward interest was projected at $198,600. Clients hired the Firm with only 4 days left to respond to the 60-Day due process notice. Because the clients were not eligible for an Offer in Compromise (OIC) due to the significant equity in their home and the SBA lien encumbering it, the Firm Attorneys proposed a Structured Workout to resolve the SBA debt. After back and forth negotiations, the SBA Loan Specialist assigned to the case approved the Workout terms which prevented potential foreclosure of their home, but also saved the clients approximately $294,000 over the agreed-upon Workout term with a waiver of all contractual and statutory administrative fees, collection costs, penalties, and interest.
Clients personally guaranteed SBA 504 loan balance of $750,000. Clients also pledged the business’s equipment/inventory and their home as additional collateral. Clients had agreed to a voluntary sale of their home to pay down the balance. We intervened and rejected the proposed home sale. Instead, we negotiated an acceptable term repayment agreement and release of lien on the home.
Clients executed personal and corporate guarantees for an SBA 7(a) loan from a Preferred Lender Provider (PLP). The borrower corporation defaulted on the loan exposing all collateral pledged by the Clients. The SBA subsequently acquired the loan balance from the PLP, including the right to collect against all guarantors. The SBA sent the Official Pre-Referral Notice to the guarantors giving them sixty (60) days to either pay the outstanding balance in full, negotiate a Repayment (Offer in Compromise (OIC) or Structured Workout (SW)), challenge their alleged guarantor liability or file a Request for Hearing (Appeals Petition) with the SBA Office of Hearings & Appeals.
Because the Clients were not financially eligible for an OIC, they opted for Structured Workout negotiations directly with the SBA before the debt was transferred to the Bureau of Fiscal Service, a division of the U.S. Department of Treasury for enforced collection.
The Firm was hired to negotiate a global Workout Agreement directly with the SBA to resolve the personal and corporate guarantees. After submitting the Structured Workout proposal, the assigned SBA Loan Specialist approved the requested terms in under ten (10) days without any lengthy back and forth negotiations.
The favorable terms of the Workout included an extended maturity at an affordable principal amount, along with a significantly reduced interest rate saving the Clients approximately $181,000 in administrative fees, penalties and interest (contract interest rate and Current Value of Funds Rate (CVFR)) as authorized by 31 U.S.C. § 3717(e) had the SBA loan been transferred to BFS.
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