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SBA Loan Default Attorneys: Understanding the Collection Process

Navigate SBA loan defaults with confidence. Discover how SBA loan default attorneys can guide you through collections and safeguard your financial future efficiently.

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Have you ever wondered what happens if you can't fully repay your Small Business Administration (SBA) loan? Navigating the complexities of SBA loan defaults can be overwhelming, but understanding the process is essential. This guide, tailored to the expertise of Protect Law Group, will help you understand SBA loan defaults, the role of SBA loan default attorneys, and the collection process.

Understanding SBA Loan Defaults

Taking out an SBA loan can provide critical funding for your business, but falling behind on repayments can lead to serious financial challenges. Protect Law Group specializes in assisting individuals and businesses facing these difficulties, offering tailored solutions to navigate the complexities of SBA loan defaults.

What Constitutes a Default?

A default occurs when a borrower fails to meet the repayment terms of their SBA loan. This can result from cash flow issues, declining revenue, or unexpected expenses. Missing payments can escalate quickly, leading to legal consequences and collection efforts by the SBA.

Consequences of a Default

Defaulting on an SBA loan can have significant repercussions, including loss of access to future SBA programs, credit score damage, and aggressive collection actions such as asset seizures or liens. Protect Law Group provides expert guidance to help mitigate these consequences and explore potential solutions.

SBA Loan Default Attorneys: Their Critical Role

Protect Law Group’s experienced SBA attorneys play a vital role in helping clients navigate the legal and financial challenges of loan defaults.

How Can an Attorney Help?

Protect Law Group attorneys assist clients by explaining their rights and responsibilities, negotiating repayment plans, and applying for offers in compromise to settle debts for less than the full amount. They also provide representation in litigation and explore debt relief options to safeguard clients’ interests.

Selecting the Right Attorney

Choosing an attorney with expertise in SBA loan defaults is crucial. Protect Law Group’s team has a proven track record in handling these cases, offering personalized strategies and a deep understanding of federal debt collection laws to achieve the best outcomes for clients.

The SBA Collection Process

Understanding the SBA collection process can help alleviate the stress of dealing with a loan default. Protect Law Group provides step-by-step guidance to navigate this process effectively.

Initial Notifications and Demand for Payment

The process begins with a notice of default from the lender. Borrowers are often given opportunities to resolve the issue through overdue payments or negotiated plans. Protect Law Group helps clients explore these options to avoid further escalation.

Treasury Debt Defense

If the debt progresses to the Treasury Department, borrowers may face aggressive collection tactics such as wage garnishment or the Treasury Offset Program. Protect Law Group offers legal defense strategies to protect clients during this stage.

Seeking Debt Relief Options

Protect Law Group assists clients in negotiating offers in compromise, where the SBA may accept less than the full debt amount. This can be a viable solution for borrowers unable to meet full repayment obligations.

Impact on Co-Guarantors or Shareholders

Co-guarantors or shareholders may also face liabilities in the event of a default. Protect Law Group provides guidance on managing joint and several liabilities to minimize risks for all parties involved.

Personal Guarantees: What You Need to Know

Personal guarantees can significantly impact borrowers’ financial obligations. Protect Law Group helps clients understand and manage these risks.

Release From Personal Guarantee

Borrowers with personal guarantees may face personal asset seizures if the business cannot repay the loan. Protect Law Group explores options for release from personal guarantees, including negotiations with lenders and demonstrating undue hardship.

Effects of an SBA Lien on Personal Property

SBA liens on personal property, such as homes, can lead to foreclosure. Protect Law Group provides legal advice to help clients protect their assets and develop strategies to manage these risks.

Alternative Solutions and Strategies

Proactive steps can help borrowers manage defaults and explore alternative solutions. Protect Law Group offers expert advice on these strategies.

Applying the Proceeds from Asset Sales

Selling assets to settle SBA debts can be an effective strategy. Protect Law Group ensures clients understand the implications and avoid potential pitfalls during this process.

Exploring SBA Loan Modification Options

Loan modifications, such as extending terms or adjusting repayment schedules, can provide relief. Protect Law Group helps clients explore these options to better manage their debts.

Considering Bankruptcy as a Last Resort

Bankruptcy may be an option for some borrowers, but it comes with long-term consequences. Protect Law Group provides thorough guidance to help clients evaluate this option and its implications.

Conclusion

Dealing with an SBA loan default is challenging, but with the expertise of Protect Law Group, borrowers can navigate the process with confidence. Their specialized attorneys provide invaluable support, helping clients explore solutions, mitigate risks, and safeguard their financial futures. Contact Protect Law Group at (833) 428-0937 for a case evaluation and personalized assistance.

Facing SBA Loan Default? Protect Your Future Today

Are you struggling with the complexities of an SBA loan default? Protect Law Group is here to help. With a team of experienced SBA loan default attorneys and Federal Agency Practitioners, we specialize in guiding individuals and businesses through the challenges of SBA loan issues. From negotiating repayment plans to exploring offers in compromise, our experts provide tailored solutions to safeguard your financial future. Don’t face this daunting process alone—contact Protect Law Group for a case evaluation at (833) 428-0937 and take the first step toward resolution today.

Frequently Asked Questions

What happens if I default on an SBA loan?

Defaulting on an SBA loan occurs when a borrower fails to make the required payments according to the loan’s terms. This can lead to serious consequences, including financial strain, loss of access to future SBA loans, credit score damage, asset seizures, liens on property, and potential lawsuits for debt recovery.

What is the role of an SBA loan default attorney?

An SBA loan default attorney specializes in helping borrowers navigate the complexities of loan defaults. They can assist with understanding rights and responsibilities, negotiating repayment plans, applying for offers in compromise, exploring debt relief options, and providing representation in litigation if necessary.

What is the SBA collection process after a loan default?

The SBA collection process begins with a notice from the lender about the default status, offering opportunities to resolve the issue. If unresolved, the debt may escalate to the Treasury Debt Defense, where aggressive collection tactics like wage garnishment and the Treasury Offset Program may be applied. Legal guidance is crucial during this process.

What are the risks of personal guarantees in SBA loans?

Personal guarantees make borrowers personally liable for repaying the loan. If the business cannot meet its obligations, personal assets, such as homes or property, may be targeted for recovery. Borrowers can explore options to negotiate a release from personal guarantees or prove undue hardship to mitigate these risks.

What are some alternatives to manage an SBA loan default?

Alternatives include selling assets to settle debts, modifying loan terms to adjust repayment schedules, or negotiating an offer in compromise to settle for less than the full amount. Bankruptcy may also be considered as a last resort, though it has long-term credit consequences.

How can I choose the right SBA loan default attorney?

When selecting an SBA loan default attorney, look for someone with a strong track record in handling SBA loan defaults, expertise in federal debt collection laws, and a personalized approach to addressing your needs. Their experience in negotiating with creditors and securing waivers can be particularly beneficial.

$166,000 SBA 7A LOAN - NEGOTIATED WORKOUT AGREEMENT

$166,000 SBA 7A LOAN - NEGOTIATED WORKOUT AGREEMENT

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.

$220,000 SBA 7A LOAN -DOT WAIVER OF ADMINISTRATIVE FEES & COSTS

$220,000 SBA 7A LOAN -DOT WAIVER OF ADMINISTRATIVE FEES & COSTS

Clients personally guaranteed an SBA 7(a) loan that was referred to the Department of Treasury for collection.  Treasury claimed our clients owed over $220,000 once it added its statutory collection fees and interest.  We were able to negotiate a significant reduction of the total claimed amount from $220,000 to $119,000, saving the clients over $100,000 by arguing for a waiver of the statutory 28%-30% administrative fees and costs.

$150,000 SBA 7A LOAN – NEGOTIATED WORKOUT AGREEMENT

$150,000 SBA 7A LOAN – NEGOTIATED WORKOUT AGREEMENT

Client’s small business obtained an SBA 7(a) loan for $150,000.  He and his wife signed personal guarantees and pledged their home as collateral. The SBA loan went into default, the term or maturity date was accelerated and demand for payment of the entire amount claimed was made.  The SBA lender’s note gave it the right to adjust the default interest rate from 7.25% to 18% per annum. The business filed for Chapter 11 bankruptcy but was dismissed after 3 years due to its inability to continue with payments under the plan. Clients wanted to file for Chapter 7 bankruptcy, which would have been a mistake as their home had significant equity to repay the SBA loan balance in full as the Trustee would likely seize and sell the home to repay the secured and unsecured creditors. However, the SBA lender opted to pursue the SBA 7(a) Guaranty and subsequently assigned the loan and the right to enforce collection to the SBA. Clients then received the SBA Official 60-Day Notice and hired the Firm to respond to it and negotiate on their behalf. Clients disputed the SBA’s alleged balance of $148,000, as several payments made to the SBA lender during the Chapter 11 reorganization were not accounted for. To challenge the SBA’s claimed debt balance, the Firm Attorneys initiated expedited discovery to obtain government records. SBA records disclosed the true amount owed was about $97,000. Moreover, because the Clients’ home had significant equity, they were not eligible for an Offer in Compromise or an immediate Release of Lien for Consideration, despite being incorrectly advised by non-attorney consulting companies that they were. Instead, our Firm Attorneys recommended a Workout of $97,000 spread over a lengthy term and a waiver of the applicable interest rate making the monthly payment affordable. After back and forth negotiations, SBA approved the Workout proposal, thereby saving the home from imminent foreclosure and reducing the Clients' liability by nearly $81,000 in incorrect principal balance, accrued interest, and statutory collection fees.

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