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Divorce Attorneys Need to Avoid This 1 SBA Loan Pitfall

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.

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Divorce Attorneys Need to Avoid This 1 SBA Loan Pitfall

A settlement or judgement in a divorce does not absolve your client of liability on a defaulted SBA loan.

1. The Split

The 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.

2. Mistake: The One Spouse is No Longer Responsible for the Debt in the Eyes of the Federal Government

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.

3. Now Your Client is Subject to Collection by the Federal Government

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.

4. Your Client May be Able to Settle the Debt

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.

5. Download Your Free White Paper

Click here to download your free white paper from Protect Law Group:

SBA Loan Guarantees and Divorce – Don’t Leave Your Client On the Hook

Please contact us for a consultation at: 1-888-756-9969.

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.

$300,000 SBA 7A LOAN - SBA OIC TERM SETTLEMENT

$300,000 SBA 7A LOAN - SBA OIC TERM SETTLEMENT

Clients personally guaranteed SBA 7(a) loan balance of over $300,000.  Clients also pledged their homes as additional collateral.  SBA OIC accepted $87,000 with the full lien release against the home.

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$680,000 SBA COVID-EIDL LOAN - SBA OHA LITIGATION

Small business sole proprietor obtained an SBA COVID-EIDL loan for $500,000. Client defaulted causing SBA to charge-off the loan, accelerate the balance and refer the debt to Treasury's Bureau of Fiscal Service for aggressive collection. Treasury added $180,000 in collection fees totaling $680,000+. Client tried to negotiate with Treasury but was only offered a 3-year or 10-year repayment plan. Client hired the Firm to represent before the SBA, Treasury and a Private Collection Agency.  After securing government records through discovery and reviewing them, we filed an Appeals Petition with the SBA Office of Hearings & Appeals (OHA) court challenging the SBA's referral of the debt to Treasury citing a host of purported violations. The Firm was able to negotiate a reinstatement and recall of the loan back to the SBA, participation in the Hardship Accommodation Plan, termination of Treasury's enforced collection and removal of the statutory collection fees.

$150,000 SBA 7A LOAN - NEGOTIATED WORKOUT AGREEMENT

$150,000 SBA 7A LOAN - NEGOTIATED WORKOUT AGREEMENT

The client personally guaranteed an SBA 7(a) loan for $150,000. His business revenue decreased significantly causing default and an accelerated balance of $143,000. The client received the SBA's Official 60-day notice with the debt scheduled for referral to the Treasury’s Bureau of Fiscal Service for aggressive collection in less than 26 days. We were hired to represent him, respond to the SBA's Official 60-day notice, and prevent enforced collection by the Treasury and the Department of Justice. We successfully negotiated a structured workout with an extended maturity date that included a reduction of the 14% interest rate and removal of substantial collection fees (30% of the loan balance), effectively saving the client over $242,000.

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