Yes, there is a statute of limitations that applies to defaulted SBA loans. But the government can still collect from you.
Book a Consultation CallStatute of limitations for SBA loan
When your business obtains an SBA loan, you sign a personal guarantee, which means that you agree to be personally liable for the debt of your business should it default.
The law specifically states that every action for money damages brought by the United States or an officer or agency thereof which is founded upon any contract express or implied in law or fact, shall be barred unless the complaint is filed within six years after the right of action accrues or within one year after final decisions have been rendered.
Therefore, if the government fails to bring suit against you within 6 years from the date its right to sue for breach of contract starts, it cannot sue you for the debt.
Unless Congress explicitly provides for a limitations period, federal agencies, including the SBA, will not be time barred from collecting their debts through any means, including offset. In general, there is no
statute of limitations for offset. Offset is the process where the government takes all or some of payments you receive from it.
Even when a statute of limitations for pursuing a civil action has expired, the United States can still collect via offset. Therefore, the SBA can collect against you by taking your tax refund or part of your Social Security, disability, military pension and other government benefits. Moreover, the SBA can take the full amount of some other payments such as travel reimbursements from the government, rent from a government rented building you own, etc. If you are a federal employee, you may have up to 15% of your pay offset.
Administrative wage garnishment (AWG) is a process in which a federal agency may collect delinquent SBA debt by garnishing the wages of a delinquent debtor without first obtaining a court order. You do have an opportunity for a hearing and to present evidence.
But, as with the offsets addressed above, no statute of limitations exists to prohibit the government from garnishing your wages. Even if state law provides for a limitations period, it does not apply to the federal government. This means even if you defaulted on your SBA loan 10 years ago, the government can still garnish your wages.
Protect Law Group can provide you with options to deal with an SBA loan default before the government sues or otherwise tries to take your hard earned money. An offer in compromise, where you pay a fraction of the debt as a settlement, or a payment plan may provide available options.
Don't let the federal government take your money. Our experienced and aggressive attorneys can provide you with solutions to your SBA loan default problem. Contact us today for a free initial case evaluation.
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.
Client personally guaranteed SBA 7(a) loan for $350,000. The small business failed but because of the personal guarantee liability, the client continued to pay the monthly principal & interest out-of-pocket draining his savings. The client hired a local attorney but quickly realized that he was not familiar with SBA-backed loans or their standard operating procedures. Our firm was subsequently hired after the client received the SBA's official 60-day notice. After back-and-forth negotiations, we were able to convince the SBA to reinstate the loan, retract the acceleration of the outstanding balance, modify the original terms, and approve a structured workout reducing the interest rate from 7.75% to 0% and extending the maturity date for a longer period to make the monthly payments affordable. In conclusion, not only we were able to help the client avoid litigation and bankruptcy, but our SBA lawyers also saved him approximately $227,945 over the term of the workout.
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.
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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