SBA Loan Default: You Pledged Your Personal Residence, Now What?
We will analyze your SBA loan problems and advise you on potential solutions such as an SBA offer in compromise for your SBA loan default.
Watch the video of this article here:
https://youtu.be/GlmkDLaz8Uw
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.
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.
Client personally guaranteed SBA 7(a) loan balance of $58,000. The client received a notice of Intent to initiate Administrative Wage Garnishment (AWG) Proceedings. We represented the client at the hearing and successfully defeated the AWG Order based on several legal and equitable grounds.
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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