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Often times, SBA debtors who have signed personal guarantees associated with an SBA Loan Agreement think that simply filing for Chapter 7 Bankruptcy is the proverbial “golden ticket” to fix the SBA loan problems and get out of personal liability with an SBA loan default. However, just because an SBA debtor files for Chapter 7 Bankruptcy versus an SBA Offer in Compromise, does not mean that the debtor is “out of the woods.”
Banks and lenders try to find ways to create or maintain superior leverage even though an SBA debtor threatens to file for bankruptcy protection after an SBA loan default. However, the story does not end with a mere electronic or paper filing. Lenders and their attorneys do scrutinize the Chapter 7 petition pre-filing actions of SBA debtors to discover if distressed SBA debtors have improperly disposed of collateral, transferred property or other reachable assets through "quitclaim" or other suspicious "gift" transactions to family, friends or other third parties to keep them from their reaches.
Chapter 7 bankruptcy debtors, in their filings, are required to disclose to the United States Trustee all of their assets, liabilities, income, and any anticipated increase in income. Any intentional failure to do so, can not only expose the SBA debtors to the adversarial complaint process and disqualify their discharge of certain debts, but can also also initiate possible referrals to the United States Department of Justice for criminal fraud and may even result in a filing of federal indictment with multiple counts of bankruptcy fraud for concealing and knowingly making false oaths and declarations.
Additionally, SBA debtors may have made misrepresentations in the origination of the SBA loan and during the servicing and work out stages with the Lender or SBA in their financial statements and written submissions to them. Lenders review these materials as part of their due diligence to protect their rights to collect on the SBA Guaranty and mitigate further damage to its and the SBA's recovery efforts.
In such instances, there may also be grounds by the Lenders (and even the SBA) to object to a Chapter 7 bankruptcy discharge or otherwise contest the bankruptcy in its entirety when borrowers or SBA loan guarantors engage in any such malfeasance. In these cases, adversarial proceedings in bankruptcy can be the forum through which lenders can resolve any guaranty affecting deficiencies contained within their files.
Dealing with the idea that you might be facing SBA loan default can be terrifying. The SBA attorneys in our office are skilled at helping clients understand all facets of their situations. If, for instance, you need to know what an SBA offer in compromise is, you can simply ask your lawyer. You should never face SBA loan problems alone. It is important to retain the services of an attorney who can help you through this difficult time in your life. We urge you to read about the services that we have available and to contact us if you believe that we can be of assistance to you right now.
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 an SBA 7(a) loan that was referred to the Department of Treasury for collection. Treasury claimed our clients owed over $220,000 once it added its statutory collection fees and interest. We were able to negotiate a significant reduction of the total claimed amount from $220,000 to $119,000, saving the clients over $100,000 by arguing for a waiver of the statutory 28%-30% administrative fees and costs.
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 personally guaranteed SBA 7(a) loan for $350,000. The small business failed but because of the personal guarantee liability, the client continued to pay the monthly principal & interest out-of-pocket draining his savings. The client hired a local attorney but quickly realized that he was not familiar with SBA-backed loans or their standard operating procedures. Our firm was subsequently hired after the client received the SBA's official 60-day notice. After back-and-forth negotiations, we were able to convince the SBA to reinstate the loan, retract the acceleration of the outstanding balance, modify the original terms, and approve a structured workout reducing the interest rate from 7.75% to 0% and extending the maturity date for a longer period to make the monthly payments affordable. In conclusion, not only we were able to help the client avoid litigation and bankruptcy, but our SBA lawyers also saved him approximately $227,945 over the term of the workout.
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