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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.

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Can a Business Loan be Forgiven if the Business Fails?

Here 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! 

Understanding Business Loans

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.

Legal Obligations vs. Business Bankruptcy

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.

Exploring SBA Loan Forgiveness

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.

Consulting with Our Legal Team

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.

Navigating Complex Financial Situations

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.

Seeking Peace of Mind

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.

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Why Hire Us to Help You with Your Treasury or SBA Debt Problems?

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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

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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

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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.

$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.

$750,000 SBA 504 LOAN - NEGOTIATED TERM REPAYMENT AGREEMENT

$750,000 SBA 504 LOAN - NEGOTIATED TERM REPAYMENT AGREEMENT

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.

$50,000 SBA 7A LOAN - RESPONSE TO SBA OFFICIAL 60-DAY NOTICE

$50,000 SBA 7A LOAN - RESPONSE TO SBA OFFICIAL 60-DAY NOTICE

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.

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