SBA EIDL Loan Default
Connecticut SBA EIDL Loan Default Attorney
For more than thirty years, attorney Timothy M. Pletter has helped thousands of Connecticut residents deal with creditors and eliminate millions of dollars of debt. Recently, a growing number of those clients share the same problem: they took out a loan from the SBA during the COVID-19 pandemic through the EIDL program, and they are now falling behind on the payments. If that describes your situation, you are not alone. More importantly, you have options, and the sooner you get legal counsel involved, the more of those options remain available to you.
Contact Our Connecticut
SBA EIDL Loan Default Attorney Today
To learn more about the benefits of bankruptcy and loan modifications
What Is the SBA EIDL Program?
The Economic Injury Disaster Loan program was originally designed to help businesses located in a federally declared disaster area. When Congress passed the CARES Act in 2020, the SBA used the EIDL program to lend billions of dollars to U.S. businesses that were struggling due to COVID. The program was broader than most people realized. In addition to traditional small businesses, gig workers such as Uber drivers and other self-employed individuals also qualified for these loans.
In 2022, the SBA stopped accepting applications for new EIDL loans. Approximately $400 billion was lent to over three million borrowers under the program during the pandemic and its aftermath. Many of those loans are now in repayment, and a significant number of borrowers, including many in Bridgeport, Fairfield, Norwalk, and Stamford, are finding it difficult to keep up with the monthly payments.
$400 BillionLent under EIDL nationally |
3 Million+Borrowers currently holding EIDL debt |
30+ YearsAttorney Pletter serving CT debtors |
What Happens When an EIDL Loan Goes Into Default?
If a borrower does not make the monthly payments on time, the loan goes into collections through the U.S. Treasury. This is not the same as defaulting on a commercial bank loan or a credit card. The federal government has collection tools that private creditors do not have.
The debt is subject to the Treasury Offset Program, which allows the government to take tax refunds and, in some cases, Social Security benefits. The Treasury can also seize assets. Specifically, the government can:
- Intercept federal and state income tax refunds
- Offset Social Security retirement and disability benefit payments
- Levy bank accounts and other financial assets
- Place liens on real estate and other property
- Refer the debt to a private collection agency
That last step carries a serious financial consequence. Once the loan is sent to a private collection agency, a very large penalty is added to the outstanding balance. This is called an administrative fee, and it inflates the debt significantly. At that point, the settlement options are fewer and the cost of resolution is higher. Every month that passes in collection makes it harder to work things out. In general, catching the default early, before the Treasury or private collection is involved, is the best position to be in.
How Attorney Pletter Reviews Every EIDL Case
When a client contacts our office to discuss their EIDL debt, the first step is a review of the original loan documents. The strategy depends entirely on the specific facts of the case. These are the questions that must be answered:
01 |
Is the loan personally guaranteed by the individual borrower, or is it in the name of a business entity only? Loans over $200,000 generally required a personal guaranty. |
02 |
What is the amount of the loan? The size of the loan affects both personal exposure and the options available for resolution. |
03 |
Is the loan in default, or are the payments still being made? |
04 |
Was any property pledged as collateral for the loan, such as real estate, equipment, or other business assets? |
05 |
Is the business still operating? If so, is it currently solvent? |
06 |
If the loan is in default, has it been sent to the Treasury for collection, or has it been sent to a private debt collection agency? |
What Are the Options? It Depends on Your Situation.
The answers to those six questions determine what can be done. Attorney Pletter has worked through every one of the following scenarios with Connecticut borrowers, including clients throughout Fairfield County and the greater New Haven area.
The Business Has Been Closed and There Is No Personal Guaranty
When the business has been dissolved and the borrower did not sign a personal guaranty, the SBA’s recourse is limited to the entity. The work is primarily documentation. We provide evidence to the SBA that the business has been properly dissolved and that there are no assets remaining, such as a bank account or a building. A complete and well-organized dissolution record can resolve the matter at the business level, with no personal financial exposure to the borrower.
The Business Has Been Closed and the Borrower Signed a Personal Guaranty
This is the scenario where personal liability is real. When the business is no longer operating and the borrower personally guaranteed the loan, we discuss whether a bankruptcy is appropriate to discharge the guaranty. For the right client, bankruptcy provides a court-supervised resolution with an immediate stop to collection activity and a defined path forward. Attorney Pletter has guided Connecticut residents through this process for three decades, including many clients in Bridgeport and throughout Fairfield County.
The Business Has Been Closed but Assets Remain
If the business has closed but assets are still present, such as a building, equipment, inventory, or funds in a business account, the SBA will want to liquidate those assets to pay the debt. Our goal in this situation is to ensure the process is handled properly, that valuations are accurate, and that any value above the loan balance is protected for the borrower to the extent the law allows.
The Business Is Still Operating
When the business remains open and solvent, we attempt to arrange an installment agreement to repay the debt. This is a structured repayment plan negotiated with the SBA that allows the business to continue operating while satisfying its obligation. However, once the loan goes into private collections, there is a very large penalty added to the debt and the settlement options are fewer. Reaching the SBA before that happens produces significantly better results.
Act Before the Government Sets the Terms
Proactive engagement through counsel is the most effective way to address a defaulted EIDL loan. Clients who contact our office early, before the default has been referred to the Treasury or a private collection agency, consistently have more options and lower costs. Every month that passes in collection makes it harder to work things out.
The government does not wait. Collection referrals happen on the SBA’s schedule. Tax refund intercepts can happen without warning. A borrower who gets ahead of the process, with an attorney reviewing the loan documents and mapping out a strategy, is in a fundamentally better position than one who waits for a garnishment notice to arrive.
Whether you are in Bridgeport, Fairfield, Norwalk, Stamford, or anywhere else in Connecticut, the advice is the same: call our office before the situation gets worse.
About Ambrogio, Pletter & Associates, LLC
Timothy M. Pletter has been helping Connecticut residents deal with creditors and eliminate debt since 1995. He is a graduate of Brandeis University and Villanova Law School, holds an AV Preeminent rating from Martindale-Hubbell, and has been recognized by Super Lawyers. Since the end of the COVID-19 pandemic, he has personally helped hundreds of Connecticut business owners work through SBA EIDL loan defaults. Every client works directly with Attorney Pletter.
Our office is located at 3288 Main Street, Suite 201, Stratford, CT 06614. We represent borrowers throughout Connecticut and offer consultations in person or remotely. We also serve Spanish-speaking clients. Hablamos Espanol.
Communities We Serve
Ambrogio, Pletter & Associates represents EIDL borrowers across Connecticut. Our primary service areas include:
| Bridgeport | Fairfield | Norwalk | Stamford | Stratford | Shelton |
| Milford | New Haven | Waterbury | West Haven | Monroe | & Statewide |
Schedule a Free Consultation
In person or remote. No obligation. The sooner we speak, the more options you have.
Ambrogio, Pletter & Associates, LLC
3288 Main Street, Suite 201, Stratford, CT 06614 | www.AmbrogioPletter.com
Take Action Today & Begin Moving Forward
Attorney Tim Pletter works directly with his clients, and most of your contact will be directly with him. Please contact our Stratford, Connecticut, office today to arrange your free consultation
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