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CalAttorney2, Lawyer
Category: Real Estate Law
Satisfied Customers: 10244
Experience:  I am a civil litigation attorney with experience representing HOAs, homeowners, businesses and others in real estate matters.
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New Question If a Bank gets paid back from the SBA all

Customer Question

New Question If a Bank gets paid back from the SBA all monies or most monies lent out to borrower What happens to lien that Bank had on property? Shouldn't it be released or reduced to the amount they didn't get paid back.
Submitted: 10 months ago.
Category: Real Estate Law
Expert:  CalAttorney2 replied 10 months ago.

Hello, My name is ***** ***** I will assist you today. Please give me a few minutes to write a response and identify any additional resources for you.

Expert:  CalAttorney2 replied 10 months ago.

Generally, the SBA does not ensure the full value of the loan.

Assuming that the bank was paid back 100%, the SBA is usually entitled (contractually) to assume the lien interest of the bank.

-But again, the specifics of what happened with your loan are going to take some more investigation and review than what I can offer on a "general information forum" - you really need someone to go and look into what happened in the bankruptcy, what happened with the SBA guarantee, and determine what exactly the bank's position is (again, it is very important to know what the authority is of the individual you are negotiating with, particularly before you send something to them in writing).

Customer: replied 10 months ago.

Ok My last question and comment on this issue!


Owner Borrower A of house is sole owner of property worth lets pretend for this example

Zillow says property worth $600,000

Debts are ($ 640,000)

Bank A still has a lean on property for -SBA's $250,000-

SBA as a creditor for the same ($250,000)

other creditors are owed ($ 20,000)

Bank B ---LOC --second mortgage ( $50,000 )

1st Mortgage owed ($320,000)

Borrower B married to Borrower A

not on title or mortgage but on SBA loan

Borrower A ---discharged all monies owed personally above in bankruptcy and all creditors are informed but no one shows up or claims debt so all discharged.

Cant or shouldn't the Bankruptcy lawyer force the Bank A to remove lean or reduce it to what they didn't get paid back from SBA ?

but SBA still going after Borrower B not bankrupt yet!!

Once Borrower B goes bankrupt and gets all discharged

What happens to SBA loan ?

Expert:  CalAttorney2 replied 10 months ago.

Dear Customer,

Please understand - bankruptcy with secured liens is a highly complex procedure - so answering a hypothetical like this is not as simple as it may appear.

The real property must be listed as an asset of the debtor in these bankruptcy petitions (even if one of the debtors is not an owner, they need to identify if the property is secured by a piece of real property), and the creditors claim exists even if they do not oppose the bankruptcy - the trustee has different obligations to perform - up to and including sale of the property to satisfy the obligations against it.

This is why I am continuing to refer you to a local attorney, I do not know the details of the way in which the bankruptcy was handled, and the current status of YOUR loan. My review of your hypothetical is really not very helpful, and there is not enough information in the hypothetical for me to opine on it (as I noted, this is a very complex legal issue, it is not something that boils down to a quick overview analysis, and I assume that you have a very complex legal issue on your hands which requires a local attorney to help you resolve).

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