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.
Defaulting on a SBA loan with the Trump Administration's reduction in SBA staff will impact your chances for resolution. Learn about the impact and how to protect yourself.
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On March 21, 2025 the U.S. Small Business Administration (SBA) unveiled a sweeping agency-wide reorganization that will eliminate roughly 2,700 positions—about 43% of its workforce—returning headcount to pre-pandemic levels. SBA Administrator Kelly Loeffler framed the cuts as a move to “do more with less” and refocus on the SBA’s core lending and disaster-relief missions (Small Business Administration).
Less than two months later, a federal judge in San Francisco issued a preliminary injunction pausing the broader Trump executive-branch down sizing plan, citing potential statutory overreach and noting that the SBA is on the list of agencies targeted for up-to-40 % layoffs (NPR).
For borrowers and guarantors already wrestling with COVID-EIDL, 7(a) or 504 obligations, this one-two punch of reorganization and litigation raises urgent questions: Will my loan servicing slow down? Will appeal rights change? What happens if my case is already at Treasury?
Change: 43% staff reduction
What SBA Says: Saves $435M/yr; trims “mission creep” (Small Business Administration)
What It Could Mean for You: Fewer case officers in servicing & OIC/Workout units; longer response times
Change: Centralized fraud & risk review
What SBA Says: Moves oversight to CFO’s office (Small Business Administration)
What It Could Mean for You: Higher scrutiny on eligibility, investigations/audits, enforcement & OIC/Workout proposals
Change: Disaster-loan servicing moved to new Office of Disaster Recovery & Resilience
What SBA Says: Cross-trains field staff (Small Business Administration)
What It Could Mean for You: Possible reassignment of your case file and new points of contact
Change: Sunset of pandemic-era staff & programs
What SBA Says: Eliminates Community Navigator, DEI pilots, Green Lender Initiative (Small Business Administration)
What It Could Mean for You: Reduced outreach and counseling resources for distressed businesses
Scenario: COVID-EIDL borrower in default
Likely Effect: Potential backlog as staff positions are abolished or reassigned
Proactive Step: Submit settlement or hardship requests now before staffing changes take hold
Scenario: 7(a) or 504 under review in response to Official 60-Day Due Process Notice before referral to Treasury's Bureau of Fiscal Service
Likely Effect: File reviews may slow; centralized risk unit may reopen closed matters
Proactive Step: Keep meticulous records & be prepared to respond to new document requests
Scenario: Repayment (i.e., Offer-in-Compromise (OIC) or Workout) pending
Likely Effect: Decision windows could lengthen unreasonably or summary denials and rejections may soon follow without a reasonable basis
Proactive Step: Request status updates in writing every 30 days; document prejudicial effect from delay; consider request for reconsideration if SBA issues summary denial or rejection
Scenario: FOIA/PA discovery and records inspection requests
Likely Effect: FOIA/PA queue historically understaffed; cuts may compound delay
Proactive Step: Request status updates every 30 days; if no progress, file OHA administrative appeal or engage in OGIS mediation to expedite or compel compliance
Scenario: OHA Appeals contesting referral to Treasury’s Bureau of Fiscal Service
Likely Effect: If SBA recall authority or staff is reduced, expect many more files to be referred to or remain at Treasury
Proactive Step: Consider SBA Office of Hearings & Appeals (OHA) litigation for recall based on due process or APA violations and leverage negotiations or proceed with adjudication to a final Decision by the United States Administrative Law Judge (ALJ)
At Protect Law Group, our Firm Attorneys are well-versed in SBA debt resolution, OHA litigation and Treasury AWG Hearing cases. We are already:
If you have a COVID-EIDL, 7(a), 504, Physical Disaster or PPP loan problem—or need to address a Treasury offset—contact us today for a Case Evaluation.
Source: https://www.nytimes.com/2025/05/23/business/economy/trump-small-business-administration.html
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 personally guaranteed an SBA 504 loan balance of $337,000. The Third Party Lender had obtained a Judgment against the clients. We represented clients before the SBA and negotiated an SBA OIC that was accepted for $30,000.
Clients borrowed and personally guaranteed an SBA 7(a) loan. Clients defaulted on the SBA loan and were sued in federal district court for breach of contract. The SBA lender demanded the Client pledge several personal real estate properties as collateral to reinstate and secure the defaulted SBA loan. We were subsequently hired to intervene and aggressively defend the lawsuit. After several months of litigation, our attorneys negotiated a reinstatement of the SBA loan and a structured workout that did not involve any liens against the Client's personal real estate holdings.
Clients personally guaranteed SBA 504 loan balance of $750,000. Clients also pledged the business’s equipment/inventory and their home as additional collateral. Clients had agreed to a voluntary sale of their home to pay down the balance. We intervened and rejected the proposed home sale. Instead, we negotiated an acceptable term repayment agreement and release of lien on the home.
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