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SBA Has Stopped Auto-Enrollment In The Hardship Accommodation Plan for COVID EIDL Loans

SBA COVID EIDL Loan Default? Learn about HAP, OIC, Workout or Bankruptcy

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SBA Has Stopped Auto-Enrollment In The Hardship Accommodation Plan for COVID EIDL Loans

As of March 19,2025, the Small Business Administration (SBA) discontinued its automatic enrollment option for the Hardship Accommodation Plan (HAP) affecting COVID EIDL loans. This sudden change applies both to borrowers with disbursements below $200,000—who had previously been able to self-enroll—and those seeking new or renewed hardship status on larger loans. Many businesses relied on the HAP to temporarily lower their monthly payments, but they will now face a more demanding repayment environment.

Key Developments

1. Termination of Automatic HAP Enrollment

     
  • The one-click enrollment feature contained in the My SBA Loan Portal that allowed COVID-EIDL borrowers with disbursement amounts of $200,000 or less to reduce their monthly payments to as little as 10% of the regular amount up to 2 and ½ years (30 months) is no longer available.
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  • Borrowers with existing hardship accommodation can continue their reduced payments until their current term expires, but automatic renewal is not an option unless future policies reverse the ban.

2. Shift in Policy under a New Administration

     
  • The new administration, led by Trump-appointed SBA Administrator Kelly Loeffler, has adopted stricter approaches to debt repayment for the SBA COVID EIDL loan portfolio.
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  • Rather than continuing to “kick the can down the road” with repeated short-term reductions, the SBA appears focused on distinguishing which borrowers can realistically repay and which are likely to default.

3. Possible Outcomes for Borrowers

     
  • Higher Payments: Borrowers could see monthly payments rise sooner, leading many to reassess their budgets, seek alternative financing or default.
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  • Accrued Interest: Delaying full payments can mean more interest piling up, ultimately increasing the total amount owed, including the likelihood of default.
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  • Program Uncertainty: If EIDL loan servicing is sold to third party debt buyers, those private entities may be even less flexible in granting payment relief.

4. Potential Next Steps & Strategies

     
  • More Flexible Offers in Compromise (OIC): The SBA may begin considering more serious settlement discussions for borrowers and guarantors whose businesses have permanently closed or cannot sustain full repayments.
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  • Aggressive Collection Actions: Borrowers who default—especially those with large loans or pledged real  estate—could face referral to the U.S. Treasury or litigation.
  • Allowing Defaults: The agency may simply let defaults take their course without offering continued hardship extensions, especially where repayment is deemed unfeasible.

5. Stay Informed

     
  • Official details about how the SBA will handle future defaults, settlement requests, or enforcement measures  remain limited.
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  • Borrowers should closely follow new SBA announcements and assess their repayment strategies. In the near term, businesses may wish to explore all financing options, consult with legal professionals, and be prepared for aggressive collection activity.

Source: https://www.sba.gov/funding-programs/loans/covid-19-relief-options/covid-19-economic-injury-disaster-loan/manage-your-eidl#options-for-borrowers-facing-financial-hardship

Why Hire Us to Help You with Your Treasury or SBA Debt Problems?

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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

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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

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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.

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$58,000 SBA 7A LOAN - AWG HEARING DEFENSE

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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$750,000 SBA 7A LOAN – NEGOTIATED WORKOUT AGREEMENT

Client’s small business obtained an SBA 7(a) loan for $750,000.  She and her husband signed personal guarantees exposing all of their non-exempt income and assets. With just 18 months left on the maturity date and payment on the remaining balance, the Great Recession of 2008 hit, which ultimately caused the business to fail and default on the loan terms. The 7(a) lender accelerated and sent a demand for full payment of the remaining loan balance.  The SBA lender’s note allowed for a default interest rate of about 7% per year. In response to the lender's aggressive collection action, Client's husband filed for Chapter 7 bankruptcy in an attempt to protect against their personal assets. However, his bankruptcy discharge did not relieve the Client's personal guarantee liability for the SBA debt. The SBA lender opted to pursue the SBA 7(a) Guaranty and subsequently assigned the loan and the right to enforce collection against the Client to the SBA. The Client then received the SBA Official 60-Day Notice. After conducting a Case Evaluation with her, she then hired the Firm to respond and negotiate on her behalf with just 34 days left before the impending referral to Treasury. The Client wanted to dispute the SBA’s alleged debt balance as stated in the 60-Day Notice by claiming the 7(a) lender failed to liquidate business collateral in a commercially reasonable manner - which if done properly - proceeds would have paid back the entire debt balance.  However, due to time constraints, waivers contained in the SBA loan instruments, including the fact the Client was not able to inspect the SBA's records for investigation purposes before the remaining deadline, Client agreed to submit a Structured Workout for the alleged balance in response to the Official 60-Day Notice as she was not eligible for an Offer in Compromise (OIC) because of equity in non-exempt income and assets. After back and forth negotiations, the SBA Loan Specialist approved the Workout proposal, reducing the Client's purported liability by nearly $142,142.27 in accrued interest, and statutory collection fees. Without the Firm's intervention and subsequent approval of the Workout proposal, the Client's debt amount (with accrued interest, Treasury's statutory collection fee and Treasury's interest based on the Current Value of Funds Rate (CVFR) would have been nearly $291,030.

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$1,500,000 SBA COVID-EIDL LOAN - SBA OHA LITIGATION

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.

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