I am a co-signer on my future ex's loan with the SBA for rental property repair. The properties were purchased before we got married and I signed because I was told that the loan could not be approved without me on it. Now, he is in foreclosure on the properties and is not paying the SBA. I am floored. We are currently separated and the divorce is in process. I spoke to the SBA and they advised that the Treasury can now take my taxes every time I file (and his). They are currently waiting to see if the foreclosure sale will go through with Bank of America. My only option is to file bankruptcy to stop them from taking my taxes, but I am also concerned about whether I can get this loan discharged in a bankruptcy? I know a student loan is not dischargeable, but is the SBA loan? I have been getting mixed answers and I want to scream. Mind you, he put his properties up as collateral but I have nothing up for collateral. I just don't know what to do or how to think. Anybody been here before or know something that might be of help? I just want my life back and feel like I made the worst mistake of it.
Steve Rhode | Window Shopper |
3/17/2013 - 4:19 pm
I'd like to thank the other commenters here. It was a big help in answering a
reader question about a woman that had an SBA loan from Katrina but lost her
property and was now having her social security garnished because of it.
SBA loans are absolutely dischargable in bankruptcy. However, bankrucpty should in most cases be your last resort. The SBA has a settlement process known as the Offer In Compromise which allows individuals to make settlement offers.
The Treasury Offset program is what was being referred to when you were told that they could take your tax refund. They also can garnish wages if they find out where you work. If you want to ensure that none of this happens, I'd suggest trying to settle so you don't have to spend the next 5 years worrying about when you'll get a call or a letter about the debt you owe.
Jason Milleisen, Founder, Distressed Loan Advisors
To get clearity on what the SBA can and can't do and what your obligations are - read your loan documents - everything should be spelled out in the docs. If you have a personal guarantee - read that as well.
This is a great example of not mixing business with personal situations. If you ever find yourself in this situation again - draw up your own agreement between you and the other co-signers that should something like this happen, you have an out.
If the sale does not go through or if it does and there is some residual that you still owe - you might try asking your ex to refinance or get another loan in his name to pay this one off. That way he essentially takes you out of the equation.
Regarding taxes or garnishments - you need an attorney - but, I also think that they cannot take more than an amount that does not put you in a financial bind yourself.
However, a good lawyer can get around anything. As already stated here - get an attorney.
Read your docs and get an attorney.
Hi danisej -
It sounds like you have a very complicated problem on your hands. Your best advice would come from speaking with a lawyer. Check out this Business Law Advisor blog on Finding Legal Representation. Good luck with your situation and thank for your question!
Steve Rhode | Window Shopper | 3/17/2013 - 4:19 pm
reader question about a woman that had an SBA loan from Katrina but lost her
property and was now having her social security garnished because of it.
DLA | Performer | 7/29/2011 - 7:28 pm
phanio | Contributor | 12/15/2009 - 8:55 am
JamieD | Former Moderator | 12/14/2009 - 3:08 pm
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