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.
Client personally guaranteed an SBA 7(a) loan to help with a relative’s new business venture. After the business failed, Treasury was able to secure a recurring Treasury Offset Program (TOP) levy against his monthly Social Security Benefits based on the claim that he owed over $1.2 million dollars. We initially submitted a Cross-Servicing Dispute, but then, prepared and filed an Appeals Petition with the SBA Office of Hearings and Appeals (SBA OHA). As a result of our efforts, we were able to convince the SBA to not only terminate the claimed debt of $1.2 million dollars against our client (without him having to file bankruptcy) but also refund the past recurring amounts that were offset from his Social Security Benefits in connection with the TOP levy.
Small business and guarantors obtained an SBA COVID-EIDL loan for $1,000,000. Clients defaulted causing SBA to charge-off the loan, accelerate the balance and refer the debt to Treasury's Bureau of Fiscal Service for collection. Treasury added nearly $500,000 in collection fees totaling $1,500,000. Clients were served with the SBA's Official 60-Day Notice and exercised the Repayment option by applying for the SBA’s Hardship Accommodation Plan. However, their application was summarily rejected by the SBA without providing any meaningful reasons. Clients hired the Firm to represent them against the SBA, Treasury and a Private Collection Agency. After securing government records through discovery, we filed an Appeals Petition with the SBA Office of Hearings & Appeals (OHA) court challenging the SBA's referral of the debt to Treasury. During litigation and before the OHA court issued a final Decision and Order, the Firm successfully negotiated a reinstatement and recall of the loan back to the SBA, a modification of the original repayment terms, termination of Treasury's enforced collection and removal of the statutory collection fees.
Clients' 7(a) loan was referred to Treasury's Bureau of Fiscal Service for enforced collection in 2015. They not only personally guaranteed the loan, but also pledged their primary residence as additional collateral. One of the clients filed for Chapter 7 bankruptcy thinking that it would discharge the SBA 7(a) lien encumbering their home. They later discovered that they were mistakenly advised. The Firm was subsequently hired to review their case and defend against a series of collection actions. Eventually, we were able to negotiate a structured workout for $180,000 directly with the SBA, saving them approximately $250,000 (by reducing the default interest rate and removing Treasury's substantial collection fees) and from possible foreclosure.
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