Expert: Christine Janklow - 2/28/2010

Question
dear christine,
i have an sba loan for which a portfolio of stocks was pledged as collateral. the business has been devastated by the recession along with some bad luck, and we can't sustain the payments. i'm preparing to file for personal bankruptcy, but i understand that will not remove the lien against my assets, only relieve me from further liability should the assets not be sufficient to satisfy the amount due.
when i stop making my payments, which will happen in the near future, i need to know more about the process by which sba will attempt to foreclose on my assets. how long will it take, what are the steps, will i get notice in advance or simply be informed that my assets were seized? where can i find out about more about the foreclosure process on secured business loans such as mine?
thanks.

Answer
Dear Chris:
Thank you for your question. Sorry to hear that your business was unable to be maintained. As for the SBA loan, there are too many variables unknown about your loan to be specific. That said, I do know that a majority of these loans are collateral, but if defaulted upon not always are the assets sought to compensate deficiency. Most loans of this type are also federally guaranteed for the bank to get a percentage of the money owed, reimbursed by the government. Once that occurs, or even if it does not apply, it is becoming more frequent that the loan company's who sold you the loan i.e. a bank or third party broker are willing to settle out the deficiencies as if they were unsecured. Getting assets from a guarantor is a costly and lengthy process so depending upon the amount owed, might determine its risk of foreclosure. If you are unable to make payments, and have not already consulted with a loan officer at your local SBA about what plans or programs might be available, do so. If nothing suits your ability to service the loan further, than you had better have a plan of action to settle the account down the road or even deal with legal collections. A plan might be to hire an attorney, or commercial debt settlement or restructuring company to negotiate on your behalf or do it yourself. It would take resources in terms of liquid funds to get the loan reduced through settlement.

As for what you can expect; If you are in collections, than the agency pursuing the loan is obligated to contact you in writing to notify you of their role in collections. You will have 30 days to dispute the debt in writing if you believe the debt or amount to be in error. I believe that if the bank intends to foreclose on you, this too must be a written notice of which you would have time to cure or address the amount owed before they could seize assets. As for aspects that are legal (protocol) in collections, you should contact your local SBA office, you can visit www.sba.gov, or your state attorney general or visit www.ftc.gov for more information. You may also ask this question of Michelle Dunn, an All Expert in business collections, who might be able to provide more insight for you.

Hope you find this helpful, if so please provide a favorable rating and comment so others may benefit as well.

Respectfully,

Christine Janklow