The federal shutdown is over and SBA & Treasury collections are resuming fast. Learn what to expect and how Protect Law Group can defend you before referrals to Treasury begin.
Book a Consultation CallThe federal government shutdown is officially over. During the shutdown, more than 670,000 federal employees were furloughed and 730,000 worked without pay (Bipartisan Policy Center). SBA and Treasury operations stalled, freezing billions in activity and creating significant backlogs.
This article explains what SBA debtors should expect now that enforcement has resumed.
The shutdown caused one of the largest SBA operational stoppages in modern history:
• SBA case processing froze
• FOIA discovery, OIC, Workout/Repayment and hardship requests paused
• Treasury cross-servicing referrals and collection action operated at reduced capacity
• Billions in lending & servicing actions stalled
While Treasury did not fully shut down, cross-servicing and enforced collection activity operated on reduced capacity.
SBA previously estimated that in a major shutdown, it is unable to deliver over $5.3 billion in loans to 10,000+ businesses, with an estimated $4.5 billion per day frozen.
This shutdown was no different—except that the volume was even higher due to unprecedented SBA loan activity since COVID.
With 1.4 million federal employees either furloughed or working without pay returning to normal operations, federal agencies are aggressively moving through their backlogs.
Borrowers should expect:
These are time-sensitive and trigger major rights and deadlines.
Especially for delinquent 7(a), 504, and EIDL loans.
Files previously on hold may are now being sent to Treasury for enforced collection.
This may include:
SBA loan specialists generally expedite their “catch up” efforts by tightening review standards - often resulting in arbitrary and capricious decisions.
Any pending requests are being processed in the order received.
Here is the harsh reality:
If you wait to act, you may be too late.
After shutdowns, federal agencies typically:
SBA debtors who act before their case is pulled into the backlog should have more options and better outcomes.
Regardless of the shutdown, you have important legal rights:
You must be notified before your debt is referred to Treasury's Bureau of Fiscal Service and substantial collection fees are assessed
Including legal enforceability, hardship, identity, documentation, or calculation errors.
Treasury and SBA both allow financial hardship-based accommodations.
Critical to verifying the validity of the claim.
You are not required to deal with SBA or Treasury alone. Attorneys authorized by 5 U.S.C. Section 500(b) can represent you before the SBA, Treasury, PCA, DoJ's National Central Intake Facility (NCIF) or in administrative appeals before U.S. Administrative Law Judges (ALJs) at the SBA Office of Hearings & Appeals Court (OHA).
Protect Law Group Attorneys help borrowers throughout the United States with the full spectrum of SBA & Treasury debt options:
Monthly payment relief based on documented financial hardship.
Especially useful if the debt is still with SBA (pre-Treasury).
Potentially settling for less than the full balance if you qualify.
Many cases involve SBA servicing errors that can be revealed through FOIA/PA discovery.
Bankruptcy does not automatically eliminate SBA or Treasury debt, but it can:
In some cases, we can advocate for financial hardship or recall from Treasury.
To protect client confidentiality, these examples reflect general outcomes achieved by the Firm:
You can dramatically improve your position before the backlog reaches your debt case.
Tax returns, bank statements, pay stubs, and financials.
Do not negotiate blind.
Where is the debt?
SBA? Treasury? BFS? DOJ?
One size does not fit all. Every SBA debtor's goals and risks differ.
This is your chance to get ahead—before the wave of notices hits.
This single step can preserve your rights and dramatically affect the outcome.
The shutdown may be over, but the SBA and Treasury collection surge is about to begin. Debtors who prepare now will have more options—and better outcomes—than those who wait.
If you have SBA or Treasury debt, contact Protect Law Group today for a Confidential Case Evaluation:
👉 Visit: www.SBA-Attorneys.com
👉 Call: 888-756-9969
👉 Email: Info@ProtectLawGroup.com
Do not wait for your SBA debt to get swept into the backlog. Get ahead of it. Protect yourself and your rights.
Our SBA Attorneys have guided thousands of small businesses through reviews, contested or negotiated debts assessed against owners, officers and guarantors, and litigated cases at the SBA Office of Hearings & Appeals (OHA) Court before presiding Administrative Law Judges (ALJs).
This article is provided for informational purposes only and does not constitute legal advice. Consult a qualified SBA-Attorney for advice regarding your individual situation.
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 executed personal and corporate guarantees for an SBA 7(a) loan from a Preferred Lender Provider (PLP). The borrower corporation defaulted on the loan exposing all collateral pledged by the Clients. The SBA subsequently acquired the loan balance from the PLP, including the right to collect against all guarantors. The SBA sent the Official Pre-Referral Notice to the guarantors giving them sixty (60) days to either pay the outstanding balance in full, negotiate a Repayment (Offer in Compromise (OIC) or Structured Workout (SW)), challenge their alleged guarantor liability or file a Request for Hearing (Appeals Petition) with the SBA Office of Hearings & Appeals.
Because the Clients were not financially eligible for an OIC, they opted for Structured Workout negotiations directly with the SBA before the debt was transferred to the Bureau of Fiscal Service, a division of the U.S. Department of Treasury for enforced collection.
The Firm was hired to negotiate a global Workout Agreement directly with the SBA to resolve the personal and corporate guarantees. After submitting the Structured Workout proposal, the assigned SBA Loan Specialist approved the requested terms in under ten (10) days without any lengthy back and forth negotiations.
The favorable terms of the Workout included an extended maturity at an affordable principal amount, along with a significantly reduced interest rate saving the Clients approximately $181,000 in administrative fees, penalties and interest (contract interest rate and Current Value of Funds Rate (CVFR)) as authorized by 31 U.S.C. § 3717(e) had the SBA loan been transferred to BFS.
Our firm successfully resolved an SBA 7a loan in the original amount of $364,000 for a New Jersey-based borrower. The client filed Chapter 7 bankruptcy but the mortgage on his real estate securing the loan remained in place. The available equity amounted to $263,470 and the deficiency equaled $317,886.
We gathered the pertinent documentation and prepared a comprehensive collateral analysis. We negotiated directly with the SBA, obtaining a full release of the mortgage for $80,000.
Client’s small business obtained an SBA 7(a) loan for $150,000. He and his wife signed personal guarantees and pledged their home as collateral. The SBA loan went into default, the term or maturity date was accelerated and demand for payment of the entire amount claimed was made. The SBA lender’s note gave it the right to adjust the default interest rate from 7.25% to 18% per annum. The business filed for Chapter 11 bankruptcy but was dismissed after 3 years due to its inability to continue with payments under the plan. Clients wanted to file for Chapter 7 bankruptcy, which would have been a mistake as their home had significant equity to repay the SBA loan balance in full as the Trustee would likely seize and sell the home to repay the secured and unsecured creditors. However, the SBA lender opted to pursue the SBA 7(a) Guaranty and subsequently assigned the loan and the right to enforce collection to the SBA. Clients then received the SBA Official 60-Day Notice and hired the Firm to respond to it and negotiate on their behalf. Clients disputed the SBA’s alleged balance of $148,000, as several payments made to the SBA lender during the Chapter 11 reorganization were not accounted for. To challenge the SBA’s claimed debt balance, the Firm Attorneys initiated expedited discovery to obtain government records. SBA records disclosed the true amount owed was about $97,000. Moreover, because the Clients’ home had significant equity, they were not eligible for an Offer in Compromise or an immediate Release of Lien for Consideration, despite being incorrectly advised by non-attorney consulting companies that they were. Instead, our Firm Attorneys recommended a Workout of $97,000 spread over a lengthy term and a waiver of the applicable interest rate making the monthly payment affordable. After back and forth negotiations, SBA approved the Workout proposal, thereby saving the home from imminent foreclosure and reducing the Clients' liability by nearly $81,000 in incorrect principal balance, accrued interest, and statutory collection fees.
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