Chapter 11 Subchapter V Bankruptcy: Explained in Plain English
Chapter 11 Subchapter V has redefined the process of small business bankruptcies. Learn what's changed (and how Protect Law Group can help) in this guide.
If your small business took out a COVID-19 Economic Injury Disaster Loan (EIDL), you’re likely aware of the challenges that come with repayment. Between rising interest rates, shifting congressional policy, and the lingering impact of the pandemic, many small businesses are unsure where to turn. In this article, we’ll break down the latest updates on SBA COVID-19 EIDL loans, including repayment challenges, potential congressional relief, and what you need to know about the new Complete COVID Collections Act. We’ll also share tips on the best way to protect your business and your personal assets.
The Small Business Administration (SBA) launched the COVID-19 EIDL program to provide critical financial relief to small businesses grappling with pandemic-related economic challenges. Over 3.9 million loans were approved, totaling more than $400 billion.
For many businesses, the COVID-19 EIDL proved a lifeline at the height of the pandemic. However, with 30-month deferments expiring and the economy still rebounding, repayment has become a challenge.
Accrued Interest & Deferment Periods
While loan payments were deferred for 30 months, interest continued to accrue. This means many borrowers now face larger balances than they initially realized.
Small Business Struggles
According to various reports, only around 36% of small businesses have fully returned to pre-pandemic sales levels. With ongoing revenue challenges, many business owners find it difficult to keep up with monthly EIDL payments.
Rising Charge-Offs
The SBA reported $18.6 billion in charge-offs from its COVID-EIDL program for fiscal year 2024, which is about 6.5% of the active portfolio. Although this is down from $52 billion in fiscal 2023, it’s still significantly higher than the charge-off rates for other SBA programs, such as 7(a) and 504 loans.
Although there is no guarantee, members of Congress have floated several ideas to help struggling borrowers:
A newly introduced bill known as the Complete COVID Collections Act is set to impact the way COVID-19 small business loans are handled. Here are some highlights:
What This Means for Borrowers
With stricter oversight and no suspension of collections, borrowers should be prepared for more aggressive loan collection efforts. If your SBA EIDL loan is delinquent, you could see faster referrals to the Treasury’s Bureau of Fiscal Service—which can lead to wage garnishments, tax refund offsets, and other collection actions.
Proponents
Opponents
If your business is struggling with SBA COVID EIDL debt, ignoring the situation can escalate the problem. Delinquencies can lead to:
Step 1: Schedule a Case Evaluation
Contact an experienced attorney authorized to practice under 5 U.S.C. § 500(b) who specializes in SBA COVID EIDL matters. A professional can assess your specific circumstances and recommend the best path forward.
Step 2: Assess Your Options
Whether it’s Offer in Compromise, Repayment Negotiation, appealing an SBA decision, or exploring new legislation, understanding your full range of options is critical.
Step 3: Let a Legal Team Advocate on Your Behalf
From filing appeals to negotiating settlements, legal experts can guide you through the complexities of the SBA COVID EIDL process and help protect your assets.
The SBA COVID-19 EIDL program was designed to be a lifeline, but its aftermath has placed many business owners in challenging financial positions. With the potential for new relief measures—and the likely passing of the Complete COVID Collections Act into federal law—it’s vital to stay informed and proactive.
If you’re feeling the pressure of repayment or have already received the SBA's Official 60-Day Due Process Notice, time is of the essence. The longer you wait, the fewer options you may have to rectify your situation.
Protect Law Group can help you understand your rights, evaluate your options, and advocate on your behalf. If you’re facing SBA COVID EIDL default or are concerned about new legislative actions, Contact Us Today to schedule a consultation. Stay ahead of the game—and safeguard your future.
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.
The clients are personally guaranteed an SBA 7(a) loan. The SBA referred the debt to the Department of Treasury, which was seeking payment of $487,981 from our clients. We initially filed a Cross-Servicing Dispute, which was denied. As a result, we filed an Appeals Petition with the SBA Office of Hearings and Appeals asserting legal defenses and supporting evidence uncovered during the discovery and investigation phase of our services. Ultimately, the SBA settled the debt for $25,000 - saving our clients approximately $462,981.
Our firm successfully facilitated the SBA settlement of a COVID-19 Economic Injury Disaster Loan (EIDL) where borrower received an SBA disaster loan of $150,000, but due to the severe economic impact of the COVID-19 pandemic, the business was unable to recover.
Despite the borrower’s efforts to maintain operations, shutdowns and restrictions significantly reduced the customer base and revenue, making continued operations unsustainable. After a thorough business closure review, we negotiated with the SBA, securing a resolution where the borrower paid only $6,015 to release the collateral, with no further financial liability for the owner/officer.
This case demonstrates how businesses affected by the pandemic can navigate SBA loan settlements effectively. If your business is struggling with an SBA EIDL loan, we specialize in SBA Offer in Compromise (SBA OIC) solutions to help close outstanding debts while minimizing financial burden.
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.
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