Impact of EIDL Loan Defaults on Credit and Treasury Actions
Defaulting on a COVID EIDL loan can seriously affect your credit and trigger federal collection actions like the Treasury Offset Program. Learn what happens and how to protect yourself.
Discover key factors regarding business loan repayment obligations after a business failure. Explore SBA loan forgiveness options and consult with Protect Law Group.
Book a Consultation CallHere at Protect Law Group, we have the privilege of serving clients all over the country. We understand the financial challenges that businesses may encounter, particularly when it comes to securing business loans. As a result, one common question that often arises is, "Can a Business Loan be Forgiven if the Business Fails?" In this blog post, we will delve into this important issue and discuss key considerations, including SBA loan forgiveness options. We aim to provide you with the necessary information to make informed decisions for your business's financial future. Read on to learn more!
Business loans are crucial for many entrepreneurs and small business owners to start, grow, or sustain their operations. However, economic downturns, unforeseen circumstances, or other factors can sometimes lead to business failure. In such instances, the question of loan repayment becomes pertinent.
When a business closes its doors, business owners need to understand that the debts incurred, such as business loans, do not simply vanish. Unfortunately, as a business owner, you may be personally liable for any loans that you have guaranteed. This means that even if your business is no longer operating, you may still be obligated to repay these loans if your business structure allows for a personal guarantee. It is crucial to have a thorough understanding of the financial responsibilities that come with owning a business, as it can have a significant impact on your finances in the event of closure.
The Small Business Administration (SBA) offers loan forgiveness programs for certain types of loans, providing a reduction of the debt obligation to eligible borrowers facing financial hardship. SBA forgiveness loan options can assist in alleviating the burden of repayment in specific circumstances. Our team can guide you through the process of applying for SBA loan forgiveness and help determine if you qualify for these programs.
At Protect Law Group, we specialize in assisting businesses and individuals with legal matters related to business loans, including SBA forgiveness. If you are grappling with a failed business and uncertain loan repayment obligations, we are here to provide expert guidance and personalized solutions tailored to your situation.
Our experienced attorneys are well-versed in navigating complex financial issues, including debt resolution, negotiating settlements, and exploring legal options to protect your interests. We will work closely with you to understand the specifics of your case and develop a strategic plan to address your concerns effectively.
Navigating the aftermath of a failed business can be overwhelming, but you don't have to face it alone. Our team at Protect Law Group is dedicated to helping you find clarity and peace of mind in uncertain times. Contact us today to schedule a consultation and take the first step toward resolving your business loan challenges.
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 obtained an SBA 7(a) loan for $324,000 to buy a small business and its facility. The business and real estate had an appraisal value of $318,000 at the time of purchase. The business ultimately failed but the participating lender abandoned the business equipment and real estate collateral even though it had valid security liens. As a result, the lender recouped nearly nothing from the pledged collateral, leaving the business owners liable for the deficiency balance. The SBA paid the lender the 7(a) guaranty money and was assigned ownership of the debt, including the right to collect. However, the clients never received the SBA Official 60-Day Notice and were denied the opportunity to negotiate an Offer in Compromise (OIC) or a Workout directly with the SBA before being transferred to Treasury's Bureau of Fiscal Service, which added an additional $80,000 in collection fees. Treasury garnished and offset the clients' wages, federal salary and social security benefits. When the clients tried to negotiate with Treasury by themselves, they were offered an unaffordable repayment plan which would have caused severe financial hardship. Clients subsequently hired the Firm to litigate an Appeals Petition before the SBA Office & Hearings Appeals (OHA) challenging the legal enforceability and amount of the debt. The Firm successfully negotiated a term OIC that was approved by the SBA Office of General Counsel, saving the clients approximately $205,000.
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.
Clients executed several trust deeds pledging seven (7) real estate properties and unconditional personal guarantees for an SBA 7(a) loan from the participating lender. The clients' small business failed and eventually defaulted on repayment of the loan exposing all collateral pledged by the clients. The SBA subsequently acquired the loan balance from the lender, including the right to liquidate and collect all pledged collateral pursuant to the trust deed instruments.
The Firm was hired to negotiate separate release of lien proposals for all 7 real estate properties. In preparation for the work assignment, the Firm Attorneys initiated discovery to secure records from the SBA and Treasury's Bureau of Fiscal Service. After reviewing the records and understanding the interplay between the lender and the SBA, the attorneys then prepared, submitted and negotiated the release of lien (ROL) for each of the 7 real estate properties for consideration.
After submitting the proposals, the assigned SBA Loan Specialists approved each ROL package - significantly reducing the total SBA debt claimed.
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