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Requesting A Loan Modification

Struggling with loan terms? Discover how requesting a loan modification can ease financial burdens and provide manageable solutions. Find guidance and tips in our article.

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Are you struggling with the terms of your current loan agreement and wondering if a loan modification might be the right solution for you? Navigating the world of loans and debt can often be overwhelming, especially when you are faced with financial challenges that make it difficult to meet your existing obligations. Requesting a loan modification can be a viable option to alleviate these burdens.

Understanding Loan Modifications

A loan modification is a change made to the terms of an existing loan by the lender. It is primarily used to make it easier for the borrower to pay back the loan. This can include adjusting the interest rate, extending the term of the loan, or even changing the type of loan. Loan modifications are typically considered when the borrower is experiencing long-term financial hardship.

Why Consider a Loan Modification?

There are numerous reasons why you may need to consider requesting a loan modification. Perhaps you have encountered unexpected financial difficulties, such as a medical emergency or job loss, which have affected your ability to make regular payments. A loan modification can result in lower monthly payments and provide you with more manageable terms, thereby preventing potential defaults which may lead to foreclosure or bankruptcy.

Who is Eligible for a Loan Modification?

Eligibility for a loan modification typically depends on the lender’s policies and your specific financial situation. Generally, lenders require evidence of financial hardship, a detailed account of monthly income and expenses, and a history of timely payments prior to the financial difficulties. It’s important to communicate with your lender to understand their specific requirements.

Steps to Requesting a Loan Modification

Requesting a loan modification begins with thorough preparation and understanding of the process. Here is a guide to help you navigate through the steps:

Step 1: Evaluate Your Financial Situation

Before reaching out to your lender, you should evaluate your current financial status. Prepare a comprehensive overview of your monthly income, expenses, assets, and liabilities. This will not only help you understand your financial position but also provide necessary information to your lender.

Step 2: Contact Your Lender

The next step is to contact your lender. It is crucial to communicate effectively about your current financial situation and express the desire to modify your loan terms. Some lenders might have specific departments dealing with loan modifications, so inquire about the right contact person when reaching out.

Step 3: Submit Required Documentation

Lenders will require documentation to assess your eligibility for a loan modification. This usually includes proof of income (such as pay stubs or bank statements), tax returns, and a letter explaining your financial hardship. Ensure you comply promptly and accurately to prevent delays.

Step 4: Negotiate Terms

Once your application is reviewed, the lender will propose modification terms. It is critical to negotiate terms that are favorable and sustainable for your long-term financial health. Do not hesitate to ask questions and clarify any provisions you are unsure about.

Finalizing the Modification

After reaching an agreement with the lender on modified terms, ensure you understand all aspects of the agreement before signing. Keep records of all correspondence and a copy of the final agreement for your records.

Legal Assistance in Loan Modifications

Legal assistance can be a significant aid when navigating the complexities of a loan modification. Professional law firms like Protect Law Group provide invaluable expertise, especially when dealing with specific loans, such as SBA and Treasury debts. Their attorneys offer a multitude of services to help secure better terms and prevent potential legal pitfalls.

Protect Law Group’s Expertise

Protect Law Group specializes in resolving SBA-related debt issues. Their experienced attorneys help develop and implement proactive strategies to resolve SBA debt collection matters effectively. They can apply legal authorities to support your position and guide you through the process of requesting a loan modification.

Available Services

Protect Law Group offers various services tailored to assist clients in distress. These services include negotiations, administrative litigation, structured workout agreements, and cross-servicing dispute preparations. They excel in providing peace of mind during these challenging financial times by minimizing damage to your business or personal assets.

The Benefits of Loan Modification

A successful loan modification can provide several benefits that can substantially affect your financial well-being and future. Here are some potential advantages:

Reduced Monthly Payments

A loan modification can result in reduced monthly payments, making it easier to handle monthly expenses without additional financial stress.

Avoiding Foreclosure

By amending the loan terms to more favorable conditions, borrowers can avoid the consequences of default, such as foreclosure, thereby securing their assets and property.

Financial Stability

With lower payments and amended terms, borrowers can achieve better financial stability, enabling long-term planning and financial health.

Challenges in Loan Modification

While loan modifications can be beneficial, they also come with their set of challenges. Understanding these challenges can prepare you better for the process.

Lender’s Reluctance

In some cases, lenders might be reluctant to modify loans due to potential losses. It requires persistence and effective communication to demonstrate that loan modification is in the best interest of both parties.

Lengthy Process

The loan modification process can be lengthy and administratively heavy, requiring patience and meticulous attention to detail.

Potential for Rejection

There is always a risk of having your loan modification request rejected. However, being well-prepared and having legal assistance can improve your chances of success.

Conclusion

Requesting a loan modification is a prudent step if you find yourself struggling with loan repayments. However, it requires careful planning and execution. By understanding your financial situation, effectively communicating your hardship to your lender, and potentially leveraging legal expertise, you can navigate this complex process more confidently. Legal professionals, like those at Protect Law Group, can guide you at each step, ensuring your request aligns with both your needs and legal requirements.

Reaching out for a loan modification can secure your financial future and offer stability during uncertain times. By taking proactive steps today, you can ensure greater peace of mind and financial security for tomorrow. It’s crucial to tackle these challenges head-on, employing strategies that align with your long-term financial goals.

$750,000 SBA 7A LOAN – NEGOTIATED WORKOUT AGREEMENT

$750,000 SBA 7A LOAN – NEGOTIATED WORKOUT AGREEMENT

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.

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$298,000 SBA 7A LOAN - NEGOTIATED WORKOUT AGREEMENT

$298,000 SBA 7A LOAN - NEGOTIATED WORKOUT AGREEMENT

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.

$1,500,000 SBA COVID-EIDL LOAN - SBA OHA LITIGATION

$1,500,000 SBA COVID-EIDL LOAN - SBA OHA LITIGATION

Small business and guarantors obtained an SBA COVID-EIDL loan for $1,000,000. Clients defaulted causing SBA to charge-off the loan, accelerate the balance and refer the debt to Treasury's Bureau of Fiscal Service for collection. Treasury added nearly $500,000 in collection fees totaling $1,500,000. Clients were served with the SBA's Official 60-Day Notice and exercised the Repayment option by applying for the SBA’s Hardship Accommodation Plan. However, their application was summarily rejected by the SBA without providing any meaningful reasons. Clients hired the Firm to represent them against the SBA, Treasury and a Private Collection Agency.  After securing government records through discovery, we filed an Appeals Petition with the SBA Office of Hearings & Appeals (OHA) court challenging the SBA's referral of the debt to Treasury. During litigation and before the OHA court issued a final Decision and Order, the Firm successfully negotiated a reinstatement and recall of the loan back to the SBA, a modification of the original repayment terms, termination of Treasury's enforced collection and removal of the statutory collection fees.

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