SBA EIDL Collection Actions and Penalties if an SBA EIDL Loan is Not Repaid
Borrowers frequently inquire about the actions the government may take if they fail to repay their SBA EIDL loans.
If payments are not received by the SBA, the agency will issue a Final Notice of Delinquency and Collection Actions. This notice states that unless you remit the full balance owed or contact the SBA Customer Service Center to discuss repayment options within 15 days from the date of the notice, the SBA may take further actions.
Those actions include:
1. Acceleration of the entire loan amount being due immediately,
2. Interest accruing at the higher default rate,
3. A lawsuit against you for the full amount owed,
4. Foreclosure against the collateral of the Borrower, as provided in the Loan Agreement and Security Agreement,
5. Garnishment of up to 15% of wages,
6. Reporting that may disqualify you from obtaining a loan/guaranty from federal agencies,
7. Reporting of your name and other information to credit bureaus, which may adversely affect your credit rating,
8. Transfer of your account to the U.S. The Department of Treasury ("Treasury Direct") who will pursue further collection actions, including offsetting any government payments owed to you,
9. Treasury Direct imposes a 30% penalty on the balance of monies owed to the SBA,
10. Referral to private collection agencies and the U.S. Department of Justice for litigation,
11. The accruing of "Cancellation of Debt Income" under section 108 of Internal Revenue Code to the Borrower or the Guarantor (on loans greater than $200,000.00), which income is reported to the IRS by the SBA pursuant to a Form 1099-C.
This document is designed for general information only. The information presented in this document should not be construed to be formal legal or tax advice nor the formation of a lawyer/client relationship.
For more information on this and other topics, please contact Kevin via any of the channels listed below:
📧 kevin@kmckernan.com | 📞 718-317-5007