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SBA SOP 50 51 3- Classifying Loans in Liquidation

Blog article by expert SBA workout attorneys from Protect Law Group, APC regarding SBA loans classified in liquidation status and how lenders begin the process

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SBA SOP 50 51 3- Classifying Loans in Liquidation

SBA SOP 50 51 3 is a very important standard operating procedure which needs to be understood by SBA debtors looking to resolve their SBA guaranteed debt.  We will be reviewing and commenting on this SBA SOP through a series of blog articles to give debtors knowledge as knowledge is power.

A.      When Loans Must Be Classified in Liquidation Status

An SBA Loan must be classified in liquidation status if any of the adverse events listed below occur:

  1. The loan is more than 60 days past due with no prospect of a deferment or a workout;
  2. A Third Party Lender or another senior lienholder has initiated a foreclosure action against collateral securing the loan;
  3. A lawsuit, which will adversely affect repayment of the SBA Loan, has been initiated against an Obligor;
  4. An Obligor has filed a voluntary petition in bankruptcy, or an involuntary petition in bankruptcy has been filed against an Obligor;
  5. The Borrower's business has been shut down or abandoned and the Obligors have not made other arrangements to repay the SBA Loan;
  6. Substantial collateral has been abandoned or is in danger of disappearing, losing its value, or being stolen;
  7. A receiver has been appointed by a court, or some other action has been initiated to liquidate the collateral or an Obligor's assets; or
  8. Any other circumstances that could substantially and adversely affect repayment of the SBA Loan.

B. When Loans Should Be Removed from Liquidation Status

SBA Loans should be removed from liquidation status and returned to regular servicing after three consecutive timely payments have been made pursuant to a written workout agreement, bankruptcy plan, reaffirmation agreement, assumption or other written agreement that cures the default.

Think of us - Protect Law Group, APC - as your "go to" team for whatever needs you may have in the SBA loan problem resolution world.

We can provide professional help at specific SBA touch points upon default from loan restructuring to loan problem defense & negotiation liquidation and appeals to the SBA Office of Hearing & Appeals. To learn more about our SBA representation services, go to www.SBA-Attorneys.com or call us at 888-756-9969 to speak to one of our experienced SBA Workout Attorneys.

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.

$298,000 SBA 7A LOAN - NEGOTIATED WORKOUT AGREEMENT

$298,000 SBA 7A LOAN - NEGOTIATED WORKOUT AGREEMENT

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.

$150,000 SBA 7A LOAN - NEGOTIATED STRUCTURED WORKOUT AGREEMENT

$150,000 SBA 7A LOAN - NEGOTIATED STRUCTURED WORKOUT AGREEMENT

Client personally guaranteed SBA 7(a) loan for $150,000. COVID-19 caused the business to fail, and the loan went into default with a balance of $133,000. Client initially hired a non-attorney consultant to negotiate an OIC. The SBA summarily rejected the ineligible OIC and the debt was referred to Treasury’sBureau of Fiscal Service for enforced collection in the debt amount of $195,000. We were hired to intervene and initiated discovery for SBA and Fiscal Service records. We were able to recall the case from Fiscal Service back to the SBA. We then negotiated a structured workout with favorable terms that saves the client approximately $198,000 over the agreed-upon workout term by waiving contractual and statutory administrative fees, collection costs, penalties, and interest.

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

$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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