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SBA Lien Release

Many debtors file bankruptcy only to find out that while their SBA loan debt was discharged, the SBA lien on their homestead (pledged as collateral for the loan) was not. What to do?

SBA Statute of Limitations on Foreclosure

You may be surprised to learn that the SBA does not always urge foreclosure even when the SBA lender has the right to do so. In many cases, an SBA lien can remain on real estate for years without any action being taken to foreclose.

However, you may also be surprised to learn that under federal law there is no statute of limitations applicable to the SBA that would bar a foreclosure action – even 20 years later!

Is Foreclosure Inevitable?

Surprisingly, no. Frequently, the SBA may just let the property sit and take no action to foreclose; this may be because there is very little equity in the property. In other cases, it may just be easier for the SBA to conserve its resources and wait until you need to sell or refinance your property. In fact, most debtors first learn that the SBA lien on their home survived bankruptcy when they later attempt to sell or refinance their home.

What Should I Offer?

The answer will depend on many factors, but principally on how much equity is in your home and whether the SBA lien is sitting in second or third position behind other mortgages making a recovery from foreclosure unlikely. However, negotiating a settlement is possible, but you should be prepared to offer at least 70% or more of the equity in your property to get the lien removed. In some cases, the payments may be taken over time, but in the vast majority of cases, a lump sum payment is the norm.