If you Owe more than $30,000 contact us for a case evaluation at (833) 428-0937
contact us for a free case evaluation at (833) 428-0937
Call us (833) 428-0937

What Is An SBA Loan Default?

Understand SBA loan default, its implications and how to tackle it, with the help of expert legal services offered by Protect Law Group in this insightful guide.

Schedule a Consultation

Have you ever wondered, “What is an SBA Loan Default”?

Perhaps you’re currently dealing with financial problems within your business and are fearing the prospect of defaulting on an SBA loan. Let’s take a thorough look at what this entails.

Protect Law Group: A Brief Introduction and Overview

Protect Law Group primarily offers expert legal services that specialize in addressing your SBA and Treasury debt issues. Catering to small business owners and federal debtors throughout the United States, they provide a wide range of services to aid in resolving SBA loans and debt intricacies. These services include:

  • Establishing and implementing proactive strategies to successfully navigate and potentially resolve your SBA debt collection issues.
  • Utilizing legal authorities to advocate for your stance.
  • Reviewing the grounds for filing Appeals Petitions with the SBA OHA.
  • Investigating any factual, procedural, and legal errors and how to prosecute or defend against them.
  • Intervening in response to notices dispatched by or on behalf of the SBA regarding administrative offset, federal salary offset, federal contractor pay offset, military pay, pension, or annuity offset.

Nationwide Authorized Representation

Protect Law Group attorneys have the permissions conferred by the Agency Practice Act to represent federal debtors across the country. Their jurisdictions cover the SBA, the SBA Office of Hearings and Appeals, the Treasury Department, and the Bureau of Fiscal Service. The attorneys are responsible for conducting initial case evaluations and diagnosing your case issues. They also take up the role of educators explaining your options and help in implementing an effective plan designed to resolve your SBA loan problems.

These attorneys follow a strict ethical code and leverage cutting-edge technologies to provide you with relevant information about your case in a cost-effective manner.

Specific SBA-related Services

Protect Law Group offers a variety of services related to SBA loans:

  1. SBA Offer in Compromise (OIC): This service provides qualifying small businesses with the option to settle their SBA debt for a lower amount than what’s owed.
  2. Structured Workout: This is an agreement, negotiated between the SBA and you, extending your repayment period.
  3. Administrative litigation services: Protect Law Group attorneys can represent you in litigation before the SBA Office of Hearings and Appeals.
  4. Negotiation services: Protect Law Group’s skilled negotiators can work with the SBA and lenders to secure the best possible terms for you.
  5. Litigation services: If the SBA sues you, Protect Law Group can review your case and suggest the best course of action.
  6. Cross-Servicing Disputes: The firm can assist you in formally preparing a Petition for Cross-Servicing Dispute if your debt has been transferred to the Treasury’s Bureau of Fiscal Service.

Their aim is to manage your SBA debt in such a way that it causes minimal harm to your business or personal asset base while also avoiding foreclosure, bankruptcy, and other negative outcomes of loan default.

Key Advantages of Utilizing Protect Law Group’s Services

Protect Law Group makes several offerings to their clients, including:

  • Extensive experience and expertise in resolving SBA debts.
  • A track record of resolving millions of dollars in SBA debts through OIC and Negotiated Repayment Agreements.
  • Highly skilled negotiators.
  • The ability to deliver peace of mind during a challenging period.

What sets Protect Law Group apart from others in the industry includes their team of educated attorneys who have mastered the six key principles necessary to resolve your SBA loan problems, and a customer experience that surpasses expectations.

Understanding SBA Loan Default

If you borrow money from the Small Business Administration (SBA), the expectation is for you to repay the full amount. Failure to do so results in the SBA declaring your loan to be in default, which could potentially trigger severe repercussions such as foreclosure, bankruptcy, or seizure of personal assets.

So, if you are currently facing an SBA loan default or carrying a heavy burden of SBA debt, Protect Law Group can help. Don’t hesitate to reach out to them for a case evaluation. Remember, the first step towards resolving a problem is acknowledging its existence and seeking help.

Here are 10 relevant FAQs based on common search queries related to SBA loan defaults:

Common SBA Loan Default Questions

1. What happens if I default on my SBA loan?
When you default on an SBA loan, the lender may demand immediate payment, seize collateral, and the SBA may pursue legal action to recover the debt through personal assets.

2. How long before an SBA loan goes into default?
An SBA loan typically goes into default after 60 days of missed payments, though specific terms may vary by lender.

3. Can I negotiate an SBA loan default settlement?
Yes, borrowers can negotiate an “Offer in Compromise” with the SBA to settle the debt for less than the full amount owed.

4. Will SBA loan default affect my personal credit?
Yes, an SBA loan default will significantly impact your personal credit score since these loans typically require personal guarantees.

5. Can the SBA garnish wages for defaulted loans?
Yes, the SBA has the authority to garnish wages and can collect up to 15% of disposable income through Treasury Offset Program.

6. What assets can the SBA seize in a default?
The SBA can seize business assets, personal property, and bank accounts that were listed as collateral or covered under the personal guarantee.

7. How can I prevent SBA loan default?
Prevention strategies include maintaining open communication with lenders, requesting payment modifications, and seeking professional financial advice early.

8. Is bankruptcy an option for SBA loan default?
While bankruptcy is possible, SBA loans are typically more difficult to discharge than conventional loans, and personal guarantees may still apply.

9. Can I get another SBA loan after defaulting?
Generally, defaulting on an SBA loan makes you ineligible for future SBA loans unless the default is fully resolved.

10. What is an SBA Offer in Compromise (OIC)?
An OIC is a formal proposal to the SBA to settle the debt for less than the full amount owed, typically requiring proof of financial hardship.

 

$150,000 SBA 7A LOAN - SBA OIC CASH SETTLEMENT

$150,000 SBA 7A LOAN - SBA OIC CASH SETTLEMENT

Client personally guaranteed SBA 7(a) loan balance of over $150,000.  Business failed and eventually shut down.  SBA then pursued client for the balance.  We intervened and was able to present an SBA OIC that was accepted for $30,000.

$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.

‍

‍

$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.

‍

Read more Case Results
Providing real solutions to individuals who are facing SBA loan problems. Contact one of our experienced SBA Attorneys and Federal Agency Practitioners today for a Case Evaluation - (833) 428-0937.
©2021 Protect Law Group, All Rights Reserved.Design by T. Walker Consulting, Inc.