The Role of Personal Guarantors in SBA Loan Defaults: What You Need to Know
Learn the vital role of personal guarantors in SBA loan defaults. Discover strategies, legal implications, and ways to navigate defaulted SBA loans effectively.
A settlement or judgement in a divorce does not absolve your client of liability on a defaulted SBA loan. Don't leave your client on the hook.
Book a Consultation CallThe common situation exists where a husband and wife co-own a business and obtain an SBA backed loan. Both parties sign a personal guarantee. Some time later the marriage fails and the parties split. However, as part of a settlement or judgement, one party takes over the business and remains responsible for the SBA loan.
The common mistake is assuming that because the marital settlement or divorce judgement states that one party is responsible for the SBA loan that the other spouse is absolved from liability. However, unless you have obtained a release from the personal guarantee, the personal guarantee remains in effect as to your client.
More importantly, the federal government does not care what the settlement or judgement says. Your client can seek indemnity form his or her former spouse as far as the SBA cares. This means, for example, if your client and his or her spouse obtained a $500,000 SBA loan, and your client's ex-spouse thereafter takes over the business and responsibility for the loan and defaults - your client remains on the hook for the $500,000 loan because he or she signed a personal guarantee.
Your client can either pay the debt or risk submission to collection actions by the federal government. Collection can include a myriad of tools including filing a law suit, foreclosure, administrative wage garnishment, federal benefit or salary offset and tax refund offset. Your client may seek indemnity from his or her ex-spouse as a remedy, but while that process proceeds ... the government commences collection.
Protect Law Group provides assertive representation of clients fighting the SBA and collection by the federal government. Your client may settle his or her SBA debt with experienced legal representation. Better yet, move in front of the problem and contact Protect Law Group to help release your client from the personal guarantee.
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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
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.
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.
Clients personally guaranteed an SBA 504 loan balance of $337,000. The Third Party Lender had obtained a Judgment against the clients. We represented clients before the SBA and negotiated an SBA OIC that was accepted for $30,000.
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.
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