What happens if an SBA COVID EIDL loan is not paid?
The SBA has resumed collection on repayment of COVID EIDL loans. The SBA has various collection options. If payments are 90-120 days behind, you are in default. The SBA can turn the debt over to the Bureau of Fiscal Services/Department of the Treasury. The same collection methods used to collect delinquent tax debt can be used: tax refund seizure; garnishment of certain federal benefits; and bank account levies.
What can I do if my loan is behind?
Request short-term payment assistance.
The Hardship Accomodation Program, which drastically reduced the monthly payment for many borrowers, has ended. The SBA is offering short-term payment assistance by reducing the monthly payment by 50% for a six month period. The SBA has published guidelines on approval and interest continues to run. There is currently no offer in compromise available on SBA COVID EIDL loans.
Consider bankruptcy for loan relief.
If your business has an SBA EIDL loan that is impossible to repay, you need answers and options. Chapter 7 bankruptcy, which may forgive the loan, may be a good option. Depending on how your business is structured, a debt reorganization, such as Chapter 13 bankruptcy or Chapter 11 bankruptcy, may lower the principal balance of the loan if you want to continue to operate and have a path forward.