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Understanding SBA Loan Defaults

Understand SBA loan defaults, repercussions, & pathways to navigate this complex scenario. Learn about resources like Protect Law Group for professional help.

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What is an SBA Loan Default?

Are you finding yourself wrestling with the complications of your Small Business Administration (SBA) loan agreement? Have you found yourself in a default status, grappling with the potential consequences this may have on your personal or business assets?

In the world of SBA loans, defaulting is one issue you don’t want to overlook. It occurs when you fail to meet your loan repayment obligations and can lead to severe repercussions that could jeopardize your financial health and the continuity of your business.

By navigating the complexities of SBA loan defaults, you’ll gain a better understanding of your situation and how to manage it. Plus, you’ll learn how you can benefit from the expert legal services offered by firms such as Protect Law Group, specializing in addressing and resolving SBA and Treasury debt issues.

Let’s delve into the intricate world of SBA loan defaults.

SBA Loan Default – An Overview

When you obtain an SBA loan, you establish an agreement with your lender to repay the loan within a certain timeframe. If you fail to make your loan payments, you enter a period of delinquency. If this delinquency remains long enough, your loan will default, and the SBA may seize the assets you placed as collateral.

But don’t panic just yet. The first thing you should do is understand the measures and options available to get you out of this tricky situation. Resources shared by organizations like Protect Law Group may assist in understanding your default status and in potentially resolving your SBA debt collection matter.

The Role of Protect Law Group

The intricate processes involved in SBA loans and debts need professional attention. This is where Protect Law Group shines. The firm is dedicated to representing small business owners and federal debtors across the U.S., specializing in a variety of legal services associated with SBA loans.

With the knowledgeable attorneys at Protect Law Group, you can expect to learn about your options and get assistance to create and implement an efficient plan to steer you out of your SBA loan complications.

The expert services of Protect Law Group encompass:

  • Advocacy for your positions using relevant legal authorities
  • Detailed reviews for filing Appeals Petitions
  • Investigation procedures concerning factual, legal, and procedural errors
  • Active response to administrative notices from the SBA regarding various forms of offset

The professionals at Protect Law Group are fully capable of representing federal debtors nationwide at any needed governing body and provide you with the most current and relevant information on your case.

Key Services Offered by Protect Law Group

Protect Law Group excels in various areas concerning SBA loan defaults, including:

SBA Offer in Compromise (OIC)

This enables your business to settle the SBA debt for a lesser amount than you owe.

Structured Workout

A tailor-made agreement that enables you to repay your debt over a more extended period.

Administrative Litigation

The attorneys at Protect Law Group can represent you in litigation happening at the SBA Office of Hearings and Appeals.

Negotiations

Protect Law Group negotiators can work with your lender to ensure you get the best possible terms for your repayment.

Litigation Services

If sued by the SBA, Protect Law Group can help establish the best course of action.

Cross-Servicing Disputes

Help prepping formal appeals for cross-servicing disputes with the Bureau of Fiscal Service should your debt be transferred.

By helping your business minimize SBA debt-related damage, you can avoid undesirable consequences such as bankruptcy or foreclosure.

Benefits and Distinguishing Features

With a consistent track record of delivering optimal web-carried services, Protect Law Group prides itself on providing:

  • Expertise in SBA debt resolution
  • Effective negotiation
  • Successfully resolved SBA debts via OIC and Negotiated Repayment Agreements
  • A sense of relief during financially stressful times

Distinguished by well-educated attorneys and customer experience exceeding expectations, Protect Law Group stands out in its industry. It’s a reliable option for handling SBA debt problems, making it a valuable ally in managing difficult financial circumstances.

If you find yourself battling an SBA loan default, remember that you are not alone. Leverage the knowledge and assistance provided by experts in the field to protect your business and personal assets. Don’t let an SBA loan default hinder your business development. Reach out to Protect Law Group or a similar organization equipped to help you navigate and overcome this challenging situation.

Frequently Asked Questions

What constitutes an SBA loan default?

An SBA loan default occurs when a borrower fails to meet the repayment obligations outlined in their loan agreement, leading to potential legal and financial consequences.

What steps should I take if I default on my SBA loan?

It’s crucial to understand your default status and explore available options to resolve the situation. Consulting with legal professionals experienced in SBA debt issues can provide guidance on the best course of action.

How can Protect Law Group assist with SBA loan defaults?

Protect Law Group specializes in representing small business owners and federal debtors, offering services such as SBA Offer in Compromise, structured workouts, administrative litigation, and negotiations to help resolve SBA debt-related matters.

What is an SBA Offer in Compromise (OIC)?

An SBA OIC is a settlement agreement that allows a borrower to repay less than the full amount owed on their SBA loan, subject to approval based on the borrower’s financial situation.

What does a structured workout entail?

A structured workout is a customized repayment plan that extends the loan term or modifies payment schedules to make debt repayment more manageable for the borrower.

What is administrative litigation in the context of SBA loans?

Administrative litigation involves legal proceedings before the SBA Office of Hearings and Appeals, where borrowers can contest decisions or actions taken by the SBA regarding their loan.

How can negotiations help in resolving SBA loan defaults?

Through negotiations, borrowers and lenders can reach mutually agreeable terms to modify loan conditions, potentially avoiding more severe consequences like asset seizure.

What are cross-servicing disputes?

Cross-servicing disputes arise when multiple agencies are involved in debt collection, leading to complexities that require specialized legal assistance to navigate effectively.

What are the benefits of seeking professional help for SBA loan defaults?

Professional assistance provides expertise in navigating legal complexities, advocating for favorable terms, and ensuring compliance with all procedural requirements, thereby increasing the chances of a successful resolution.

How can I contact Protect Law Group for assistance?

You can reach out to Protect Law Group through their official website or contact information provided in the article to schedule a consultation and discuss your specific situation.

$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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$310,000 SBA 7A LOAN - SBA OIC TERM WORKOUT

$310,000 SBA 7A LOAN - SBA OIC TERM WORKOUT

Client personally guaranteed an SBA 7(a) loan for $100,000 from the lender. The SBA loan went into early default in 2006 less than 12 months from disbursement. The SBA paid the 7(a) guaranty monies to the lender and subsequently acquired the deficiency balance of about $96,000, including the right to collect against the guarantor. However, the SBA sent the Official 60-Day Due Process Notice to the Client's defunct business address instead of his personal residence, which he never received. As a result, the debt was transferred to Treasury's Bureau of Fiscal Service where substantial collection fees were assessed, including accrued interest per the promissory note. Treasury eventually referred the debt to a Private Collection Agency (PCA) - Pioneer Credit Recovery, Inc. Pioneer sent a demand letter claiming a debt balance of almost $310,000 - a shocking 223% increase from the original loan amount assigned to the SBA. Client's social security disability benefits were seized through the Treasury Offset Program (TOP). Client hired the Firm to represent him as the debt continued to snowball despite seizure of his social security benefits and federal tax refunds as the involuntary payments were first applied to Treasury's collection fees, then to accrued interest with minimal allocation to the SBA principal balance.

We initially submitted a Cross-Servicing Dispute (CSD) challenging the referral of the debt to Treasury based on the defective notice sent to the defunct business address. Despite overwhelming evidence proving a violation of the Client's Due Process rights, the SBA still rejected the CSD. As a result, an Appeals Petition was filed with the SBA Office of Hearings & Appeals (OHA) Court challenging the SBA decision and its certification the debt was legally enforceable in the amount claimed. After several months of litigation before the SBA OHA Court, our Firm Attorney successfully negotiated an Offer in Compromise (OIC) Term Workout with the SBA Supervising Trial Attorney for $82,000 spread over a term of 74 months at a significantly reduced interest rate saving the Client an estimated $241,000 in Treasury collection fees, accrued interest (contract interest rate and Current Value of Funds Rate (CVFR)), and the PCA contingency fee.

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$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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