Can a Business Loan be Forgiven if the Business Fails?
Discover key factors regarding business loan repayment obligations after a business failure. Explore SBA loan forgiveness options and consult with Protect Law Group.
Small businesses facing mounting debt obligation from an SBA loan may seek a small business reorganization under the new bankruptcy law.
Book a Consultation CallThe rapid deterioration of the American job market (and the world job market) will make it tough on San Diego businesses in the coming months. The new Chapter 11 Subchapter V bankruptcy may provide an easier solution for small businesses. A small business reorganization may save your business.
Employment
No matter how you slice it, the employment picture does not bode well for small businesses. With people out of work, less money will be spent in the economy and at your business. Unfortunately, this will further negatively affect employment. Even with the Payment Protection Program and various deferments, the situation does not look good for small businesses. For many small businesses, an SBA 7a or 504 loan consists of the main debt obligation. Without a small business reorganization, the lender and / or the SBA can attempt to collect.
Like many businesses, your business may be facing a downturn. The options may seem few. Lending programs, like the SBA's Disaster Loan program, may help but serve to add debt to an existing debt problem. The regular Chapter 11 bankruptcy provides protection from creditors while a business reorganizes its debts, but it remains a costly and time-consuming option. If the situation exists as too dire, your business could just shut its doors. But, as a small business owner, you may still owe on your business debts as a personal guarantor. For instance, you will remain personally liable on an SBA loan even if your business closes its doors.
The new Chapter 11 bankruptcy went into effect in February of 2020. As such, a small business whose main debt consists of an SBA loan may use the new bankruptcy to reorganize the debt. Therefore, a bankruptcy reorganization may enable your small business to quickly and efficiently restructure its SBA debt. By reorganizing the debt, your small business may reduce its monthly debt obligation to coincide with its cash flow. A reorganization bankruptcy would allow your small business to continue operating.
If your San Diego County small business needs reorganization of its SBA loan debt, talk to one of our experienced attorneys today.
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.
Clients personally guaranteed SBA 504 loan balance of $750,000. Clients also pledged the business’s equipment/inventory and their home as additional collateral. Clients had agreed to a voluntary sale of their home to pay down the balance. We intervened and rejected the proposed home sale. Instead, we negotiated an acceptable term repayment agreement and release of lien on the home.
Client received the SBA's Official 60-Day Notice for a loan that was obtained by her small business in 2001. The SBA loan went into default in 2004 but after hearing nothing from the SBA lender or the SBA for 20 years, out of the blue, she received the SBA's collection due process notice which provided her with only one of four options: (1) repay the entire accelerated balance immediately; (2) negotiate a repayment arrangement; (3) challenge the legal enforceability of the debt with evidence; or (4) request an OHA hearing before a U.S. Administrative Law Judge.
Client hired the Firm to represent her with only 13 days left before the expiration deadline to respond to the SBA's Official 60-Day Notice. The Firm attorneys immediately researched the SBA's Official loan database to obtain information regarding the 7(a) loan. Thereafter, the Firm attorneys conducted legal research and asserted certain affirmative defenses challenging the legal enforceability of the debt. A written response was timely filed to the 60-Day Notice with the SBA subsequently agreeing with the client's affirmative defenses and legal arguments. As a result, the SBA rendered a decision immediately terminating collection of the debt against the client's alleged personal guarantee liability saving her $50,000.
Client's small business obtained an SBA COVID EIDL for $301,000 pledging collateral by executing the Note, Unconditional Guarantee and Security Agreement. The business defaulted on the loan and the SBA CESC called the Note and Guarantee, accelerated the principal balance due, accrued interest and retracted the 30-year term schedule.
The loan was transferred to the Treasury's Bureau of Fiscal Service which resulted in the statutory addition of $90,000+ in administrative fees, costs, penalties and interest with the total debt now at $391.000+. Treasury also initiated a Treasury Offset Program (TOP) levy against the client's federal contractor payments for the full amount each month - intercepting all of its revenue and pushing the business to the brink of bankruptcy.
The Firm was hired to investigate and find an alternate solution to the bankruptcy option. After submitting formal production requests for all government records, it was discovered that the SBA failed to send the required Official 60-Day Pre-Referral Notice to the borrower and guarantor prior to referring the debt to Treasury. This procedural due process violation served as the basis to submit a Cross-Servicing Dispute to recall the debt from Treasury back to the SBA and to negotiate a reinstatement of the original 30-year maturity date, a modified workout, cessation of the TOP levy against the federal contractor payments and removal of the $90,000+ Treasury-based collection fees, interest and penalties.
.jpg)
