Pros and Cons of SBA Loan Modification
Discover the pros & cons of SBA loan modification with Protect Law Group. Expert SBA debt relief help for small businesses. Take control today!
Yes, there is a statute of limitations that applies to defaulted SBA loans. But the government can still collect from you.
Book a Consultation CallStatute of limitations for SBA loan
When your business obtains an SBA loan, you sign a personal guarantee, which means that you agree to be personally liable for the debt of your business should it default.
The law specifically states that every action for money damages brought by the United States or an officer or agency thereof which is founded upon any contract express or implied in law or fact, shall be barred unless the complaint is filed within six years after the right of action accrues or within one year after final decisions have been rendered.
Therefore, if the government fails to bring suit against you within 6 years from the date its right to sue for breach of contract starts, it cannot sue you for the debt.
Unless Congress explicitly provides for a limitations period, federal agencies, including the SBA, will not be time barred from collecting their debts through any means, including offset. In general, there is no
statute of limitations for offset. Offset is the process where the government takes all or some of payments you receive from it.
Even when a statute of limitations for pursuing a civil action has expired, the United States can still collect via offset. Therefore, the SBA can collect against you by taking your tax refund or part of your Social Security, disability, military pension and other government benefits. Moreover, the SBA can take the full amount of some other payments such as travel reimbursements from the government, rent from a government rented building you own, etc. If you are a federal employee, you may have up to 15% of your pay offset.
Administrative wage garnishment (AWG) is a process in which a federal agency may collect delinquent SBA debt by garnishing the wages of a delinquent debtor without first obtaining a court order. You do have an opportunity for a hearing and to present evidence.
But, as with the offsets addressed above, no statute of limitations exists to prohibit the government from garnishing your wages. Even if state law provides for a limitations period, it does not apply to the federal government. This means even if you defaulted on your SBA loan 10 years ago, the government can still garnish your wages.
Protect Law Group can provide you with options to deal with an SBA loan default before the government sues or otherwise tries to take your hard earned money. An offer in compromise, where you pay a fraction of the debt as a settlement, or a payment plan may provide available options.
Don't let the federal government take your money. Our experienced and aggressive attorneys can provide you with solutions to your SBA loan default problem. Contact us today for a free initial case evaluation.
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 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.
Clients obtained an SBA 7(a) loan for $324,000 to buy a small business and its facility. The business and real estate had an appraisal value of $318,000 at the time of purchase. The business ultimately failed but the participating lender abandoned the business equipment and real estate collateral even though it had valid security liens. As a result, the lender recouped nearly nothing from the pledged collateral, leaving the business owners liable for the deficiency balance. The SBA paid the lender the 7(a) guaranty money and was assigned ownership of the debt, including the right to collect. However, the clients never received the SBA Official 60-Day Notice and were denied the opportunity to negotiate an Offer in Compromise (OIC) or a Workout directly with the SBA before being transferred to Treasury's Bureau of Fiscal Service, which added an additional $80,000 in collection fees. Treasury garnished and offset the clients' wages, federal salary and social security benefits. When the clients tried to negotiate with Treasury by themselves, they were offered an unaffordable repayment plan which would have caused severe financial hardship. Clients subsequently hired the Firm to litigate an Appeals Petition before the SBA Office & Hearings Appeals (OHA) challenging the legal enforceability and amount of the debt. The Firm successfully negotiated a term OIC that was approved by the SBA Office of General Counsel, saving the clients approximately $205,000.
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.
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