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The Role of Personal Guarantors in SBA Loan Defaults: What You Need to Know

Learn the vital role of personal guarantors in SBA loan defaults. Discover strategies, legal implications, and ways to navigate defaulted SBA loans effectively.

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The Role of Personal Guarantors in SBA Loan Defaults: What You Need to Know

Introduction

In the realm of Small Business Administration (SBA) loans, understanding the critical role of personal guarantors amid defaults is paramount. This comprehensive guide navigates the intricacies, responsibilities, and strategies essential for individuals associated with SBA loans and highlights the significance of personal guarantors in these circumstances.

Unveiling the Responsibilities of Personal Guarantors

Personal guarantors serve as a protective shield for lenders, offering assurance of repayment in cases of SBA loan defaults. Their commitment plays a pivotal role in securing loans, emphasizing the importance of understanding the weight of their responsibilities in such financial arrangements.

Impact of SBA Loan Defaults on Personal Guarantors

When an SBA loan defaults, personal guarantors face potential financial risks. They become liable for the unpaid debt, subjecting their assets and finances to potential collection actions by the lender or SBA to recover outstanding amounts.

Strategies for Personal Guarantors Facing SBA Loan Defaults

Navigating through defaulted SBA loans requires strategic action from personal guarantors. Seeking legal counsel, negotiating settlements, or exploring compromise options can mitigate the repercussions and offer avenues for resolution amid challenging circumstances.

Legal Support: Safeguarding Personal Guarantors' Interests

Engaging legal expertise becomes crucial for personal guarantors entangled in SBA loan defaults. Legal professionals well-versed in SBA loan matters offer guidance, negotiation prowess, and explore legal avenues to shield guarantors' interests effectively.

FAQs: Answers to Common Queries

  • How does a personal guarantor impact an SBA loan default?
  • Personal guarantors assure repayment in the event of SBA loan defaults, serving as a backup for lenders.

  • What happens if a personal guarantor fails to repay an SBA loan?
  • Failure to repay can lead to potential collection actions, risking the guarantor's assets and finances.

  • Can negotiation help personal guarantors facing SBA loan defaults?
  • Yes, negotiation and settlement discussions can provide options to alleviate the impact of defaults.

  • Should personal guarantors seek legal assistance for defaulted SBA loans?
  • Seeking legal counsel is highly recommended to protect and navigate through defaulted SBA loans effectively.

  • Are there ways to protect personal assets in SBA loan defaults?
  • Exploring settlement options, negotiation strategies, and legal guidance can safeguard personal assets.

  • What role does a personal guarantor play in mitigating SBA loan default consequences?
  • Guarantors can engage in negotiations, explore settlements, and seek legal support to mitigate default consequences.

Conclusion

Understanding the pivotal role of personal guarantors in SBA loan defaults is crucial for individuals associated with such financial arrangements. This article elucidates their responsibilities, implications of defaults, mitigation strategies, and the importance of legal support, providing a comprehensive roadmap for navigating through the complexities of defaulted SBA loans effectively.

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.

$220,000 SBA 7A LOAN -DOT WAIVER OF ADMINISTRATIVE FEES & COSTS

$220,000 SBA 7A LOAN -DOT WAIVER OF ADMINISTRATIVE FEES & COSTS

Clients personally guaranteed an SBA 7(a) loan that was referred to the Department of Treasury for collection.  Treasury claimed our clients owed over $220,000 once it added its statutory collection fees and interest.  We were able to negotiate a significant reduction of the total claimed amount from $220,000 to $119,000, saving the clients over $100,000 by arguing for a waiver of the statutory 28%-30% administrative fees and costs.

$1,200,000 SBA 7A LOAN - SBA OHA LITIGATION

$1,200,000 SBA 7A LOAN - SBA OHA LITIGATION

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.

$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.

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