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SBA Loan Default: What Happens When You Default And What You Can Do About It

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    Jason Milleisen

    Hi! I just wanted to clear up an error in your article. The 60-day letter that comes from the SBA is your LAST chance to settle with the SBA or the lender. This article stated that the 60 day letter states “that your case has been transferred to the Treasury Department”. This is not the case. The 60-day letter gives you 60 days to contact the SBA (it’s a department known as Treasury Offset, so it can be confusing), and if they don’t hear from you at that point, then it goes to Treasury.

    And to be clear, settling with the Treasury is VERY difficult, and almost always MUCH more expensive than if you settle directly with the lender or the SBA. So if you get a 60-day letter and want to settle, that is your last chance to work out reasonable settlement terms (let’s say in the 5% to 40% range). Otherwise, the Treasury, who usually offers the same terms to everyone, will want 70% to 80% of the loan balance. And that’s after they hit you with a 28% penalty, which means they REALLY are going to seek the entire balance from you. And they always require lump sums. If you want to a payment plan with the Treasury, they will require you to pay it off in full over an extremely short time from of 2-3 years.

    I used to work for the largest SBA lender in the USA, and I now work exclusively with borrowers who can’t afford their SBA loans. I can tell you definitively that if you want to settle your SBA debt, DO NOT WAIT until the file goes to Treasury. I’ve had borrowers tell me that their attorney or CPA (who knows nothing about SBA) told them to wait it out, and eventually the SBA will settle for pennies on the dollar. This may work for other types of creditors, but not the SBA.

      This comment refers to an earlier version of this post and may be outdated.

      Jessica Dinsmore

      Hi Jason,

      Thank you so much for bringing this to our attention! We will be updating the review to reflect this new information. Stay tuned!

        This comment refers to an earlier version of this post and may be outdated.

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