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socrateaser
socrateaser, Attorney
Category: Bankruptcy Law
Satisfied Customers: 34149
Experience:  Attorney and Real Estate Broker -- Retired (mostly)
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SBA loan default The SBA loan was borrowed under S. Corporation.

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SBA loan default

The SBA loan was borrowed under S. Corporation. But the borrower peraonally guaranteed the loan to the bank. The personal guarantee including three personal real-estates besides the business real-estate. Now the business revenue has stopped and the only asset is the real-estate of business. What optional the borrower has at this time?

The bank may put borrower's real-estate on auction to get whatever value to get the loan paid. In addition, the bank can also garnish the salary of the borrower and personal bank account. Is this the process in all foreclosures? Some websites talk about negotiate with lender about SBA loan but it seems only that makde sense if the bank see no value from borrower's asset. By SBA loan rule, the bank has to dig out all the personal of the borrower before claiming for government's SBA loan guarantee. Right? THe borrower is also involving in suing the business seller when the SBA loan borrowed for fraud. But the bank does not care why the busines goes down (due to fraud or else)
Submitted: 1 year ago.
Category: Bankruptcy Law
Expert:  socrateaser replied 1 year ago.
Hello,

Does the guarantor have large non-exempt assets, such as a home with equity (fair market value minus all loans)?

Does the guarantor have large balance bank or investment accounts, other than 401(k) or IRA accounts?

Thanks in advance.
Customer: replied 1 year ago.

Those asset (bank account, home equity) are able to cover the loan amount. But those are jointly owned with his wife who is not a guarantor.

Expert:  socrateaser replied 1 year ago.
If the home is titled as "tenants by the entireties," then your creditors cannot reach that home, because title cannot be severed to pay one spouse's debts.

Few bank accounts are titled "by the entireties," and if yours are not, then your creditors can reach the accounts.

You cannot file for bankruptcy, because the bankruptcy trustee can forcibly divided "by the entireties" property interests. BotXXXXX XXXXXne, you have some negotiating leverage, because your creditors cannot reach much of your property to satisfy the loan guarantee. But, you cannot use bankruptcy to escape completely, if there is enough equity to cover the SBA loan.

Please let me know if I can be of further assistance.
Customer: replied 1 year ago.

Thanks. Does the home typically jointly owned under "tenants by the entireties"? But I remember they asked my wife to sign something.


I have to check what it was. Could that be waiving "tenants by entireties"?


Also, can the bank account become "by the entireties" upon request?


Lastly, will the bank garnish borrower's salary?

Expert:  socrateaser replied 1 year ago.
Does the home typically jointly owned under "tenants by the entireties"?

A: Typically, husband and wife take title as "husband and wife," or as "tenants by the entireties." Each designation meains the same thing.

But I remember they asked my wife to sign something.

A: That could be a problem, if your spouse signed a consent to the sale of the property in the event of your default.

I have to check what it was. Could that be waiving "tenants by entireties"?


A: See above.

Also, can the bank account become "by the entireties" upon request?


A: Depends on the bank. Contact your bank and ask. If they say no, contact some other banks, until you find one who will create an account by the entireties.

Lastly, will the bank garnish borrower's salary?

A: Pennsylvania law does not permit wage garnishment on an ordinary debt, such as a bank loan.

Hope this helps.
Customer: replied 1 year ago.

 

 

What about KY law regarding garnishment. Exactly, the lender and business real-estate is in KY. The borrower is in IL.

 

Also for example, if we have three real-estates putting on the "unconditional" guarantee" of SBA loan, can we sell the houses given the SBA loan is not being default? Can the bank provent us from selling our own houses ? Last time, when we try to re-finance our house, the SBA lender required we cannot finance out more than the current debt. Is it a legal requirement? What if I need money to fund my children's university education in this case or I have emergency usage due to sickness of family member.

 

Again, if the SBA loan is being paid according to payment plan(i.e. $2000/month), can the lender freeze my asset which is under the "unconditonal guarantee"? Do we have to pay off the SBA loan before allowing to see our own house?

Expert:  socrateaser replied 1 year ago.

What about KY law regarding garnishment. Exactly, the lender and business real-estate is in KY. The borrower is in IL.

 

A: Sorry, for some reason I thought that you were in PA. IL law is what matters, and IL law permits wage garnishment.

Also for example, if we have three real-estates putting on the "unconditional" guarantee" of SBA loan, can we sell the houses given the SBA loan is not being default?


A: Yes.


Can the bank provent us from selling our own houses ?


A: No.


Last time, when we try to re-finance our house, the SBA lender required we cannot finance out more than the current debt. Is it a legal requirement?


A: SBA does not want you to incur more debt, until the business loan is paid off. This has nothing to do with your selling properties that you currently own, because you wouldn't be incurring any additional debt.

 

What if I need money to fund my children's university education in this case or I have emergency usage due to sickness of family member.

 

A: Unfortunately, these things are not legal arguments to avoid paying a debt. The loan takes precedence.

 

Again, if the SBA loan is being paid according to payment plan(i.e. $2000/month), can the lender freeze my asset which is under the "unconditonal guarantee"? Do we have to pay off the SBA loan before allowing to see our own house?

 

A: If the loan is not in default, then the SBA can't do anything. The SBA and bank are not damaged by your acts or omissions unless you are in default on the loan. If you maintain the payments according to the loan agreement, then there is nothing for you to worry about at all.

 

Hope this helps.

socrateaser, Attorney
Category: Bankruptcy Law
Satisfied Customers: 34149
Experience: Attorney and Real Estate Broker -- Retired (mostly)
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