Can the SBA Put a Lien on My House for EIDL Default?

Let me guess whats going through your head right now. You got an EIDL loan during COVID. Maybe you were told it didn't require collateral. Maybe you read somewhere that loans under $200,000 were unsecured. And now you're behind on payments, or you've stopped paying entirely, and you're wondering if the SBA can actually come after your house.

Heres the thing. At Spodek Law Group, we get this question constantly. And the answer is more complicated - and more concerning - than most people realize.

The short version? Yes, under certain circumstances, they can. And the "no collateral required" language you remember from your loan application doesn't mean what you think it means.

Let me explain what were actually dealing with here.

The Collateral Confusion That Trips Everyone Up

OK so when the EIDL program launched in 2020, the SBA waived collateral requirements for loans under $200,000. Later they raised that threshold to $500,000.

People read this and thought: "No collateral means they cant take my stuff."

Thats not what it means.

What "no collateral required" actually means is that the SBA didn't require you to pledge specific assets as security BEFORE they gave you the loan. They didnt need you to put up your house or your car or your equipment as a condition of getting approved.

But that has absolutly nothing to do with what happens if you default.

Federal debt collection is a completly different animal than private debt collection. The government has tools that regular creditors can only dream about. And they dont need to have secured your loan upfront to use those tools.

What Actualy Happens When You Default

Let me walk you through the process, becuase understanding the timeline is important for knowing when you need to take action.

Stage 1: SBA Collections

When you first stop paying, your loan goes into the SBA's internal collection process. You'll get letters. Youll get calls. Theyll try to work out payment arrangements or hardship accommodations.

At this stage, things are relatively flexible. The SBA has programs for people who legitimately cant pay. But most people either ignore these notices or assume theyll go away.

They don't go away.

Stage 2: Treasury Referral

After the SBA determines it can't collect, your debt gets referred to the Treasury Department. Specifically, to the Bureau of Fiscal Service through whats called the Treasury Offset Program.

This is where things get serious.

Treasury has collection powers that the SBA doesn't have. They can intercept your tax refunds. They can garnish your wages (up to 15% of disposable pay for federal debts). They can take money directly from your bank accounts.

And they can pursue judgment liens.

Stage 3: Judgment and Liens

If Treasury decides to pursue a court judgment against you - or if the SBA itself sues you before referral - that judgment becomes a lien on your real property. Automatically. In every state where the judgment is filed.

So even if your original EIDL loan didnt have your house as collateral, a judgment lien attaches to your house anyway. And every other real property you own.

Can they immediately force you to sell? Not usually. But that lien means you cant sell or refinance without paying them. It clouds your title. It follows you.

The Personal Guarantee Problem

Heres something that catches people off guard. Even if you have an LLC or corporation, even if your business is completely separate from your personal finances, you probably signed a personal guarantee when you got your EIDL loan.

Take a minute to check your loan documents. Seriously. Go look.

That personal guarantee means the SBA isnt just coming after your business. Theyre coming after you personally. Your personal assets. Your personal bank accounts. Your personal real estate.

The corporate shield that protects you in other situations? Dosent apply here. You waived it when you signed that guarantee.

At Spodek Law Group, one of the first things we do when clients come to us with EIDL problems is review those loan documents. Becuase the specific language matters for what options you have going forward.

Call us at 212-300-5196 if you want us to look at your situation. Understanding what you actually signed is the first step toward protecting yourself.

The UCC Filing Most People Dont Know About

Heres another surprise for EIDL borrowers. Many of these loans had UCC financing statements filed against them.

UCC - Uniform Commercial Code - filings create a security interest in business assets. Not real estate, usually, but equipment, inventory, accounts receivable, things like that.

But heres the thing. If your business assets are tied up by a UCC filing, and you default, the SBA can seize and sell those assets. And whatever you used business funds for? Thats potentially clawed back too.

Many people running small businesses have commingled personal and business assets to some degree. That commingling can create exposure for personal assets even beyond the personal guarantee issue.

This is complicated stuff. And its exactly why you need someone who understands both the federal debt collection side and the business/personal asset protection side to help you navigate it.

What "Offer in Compromise" Actualy Involves

People hear you can settle SBA debt for less than you owe through an offer in compromise. And technically, that's true. But its not as simple as calling up and offering 20 cents on the dollar.

The SBA has specific criteria for an offer in compromise:

• You need to demonstrate genuine financial hardship
• They're going to look at ALL your assets, including your house
• Theyre going to analyze your income and expenses
• They need to believe theyll get more through compromise than through continued collection

That last point is key. If you have a house with equity, the SBA is going to calculate: can we get more by continuing to collect, eventually getting a judgment, and forcing sale of this property?

So your house doesnt get ignored in the OIC process. It becomes central to the calculation of what you should offer.

Many people submit offers that get rejected because they don't understand this math. Then they're worse off than before because they've given the SBA a complete picture of their finances to use in collection.

Working with someone who understands how these offers are evaluated is essential. Todd Spodek and our team at Spodek Law Group have helped clients navigate this process successfully. But it requires strategy, not just hope.

The Bankruptcy Question

A lot of people facing EIDL default start thinking about bankruptcy. And its a legitimate option - but with complications you need to understand.

EIDL loans can be discharged in Chapter 7 bankruptcy. Unlike some federal debts (like most student loans), these loans arent automatically non-dischargeable.

But.

If theres any allegation of fraud in how you obtained or used the EIDL loan, the government can object to discharge. And "fraud" gets defined pretty broadly in these contexts. If you overstated your employee count, misrepresented your business status, used funds for prohibited purposes - all of that can be used to argue the debt shouldnt be discharged.

In Chapter 13 bankruptcy, you'll need to pay EIDL debt through your payment plan, potentially over 3-5 years. Your house can be protected in Chapter 13, but you still need to address the underlying debt.

Bankruptcy timing matters too. Filing too early or too late can affect your options. And bankruptcy becomes part of your public record, affecting credit and potentially other aspects of your life.

We work with bankruptcy attorneys to help clients figure out whether this path makes sense for their specific situation. Sometimes it does. Sometimes other options are better. But its not a decision to make without professional guidance.

The Timeline You Need to Understand

Federal debt collection has long timelines. Unlike private debt that might become uncollectable after a few years, federal debts can be pursued for much longer.

The basic statute of limitations for federal debt collection is 10 years from the date of default. But that clock can be reset or extended by:

• Making partial payments (resets the clock)
• Entering into workout agreements (potentially extends)
• Bankruptcy filings (tolls the clock during proceedings)

So that EIDL loan from 2020? The government could still be actively pursuing collection in 2030 or later.

This means strategies that involve waiting it out are unlikely to work. The government is patient. And they have sophisticated tracking systems to make sure these debts dont just disappear.

Protecting Your Home Specifically

OK, so what can you actually do to protect your house from EIDL collection?

Before theres a judgment:

At this stage, you have the most options. You can negotiate with the SBA for payment plans, hardship accommodations, or settlement. You can explore offer in compromise. You can consider bankruptcy if appropriate. The key is acting before a judgment is entered.

After there's a judgment but before forced sale:

A judgment lien makes things harder, but it's not the end. In most states, there's a homestead exemption that protects some equity in your primary residence. The amounts vary by state - in some states its unlimited, in others its quite limited.

Even with a lien, forced sale is usually a last resort. Creditors prefer to just wait, knowing youll eventually need to sell or refinance. At that point, they get paid.

But you still have options to negotiate the amount, set up payment plans, or potentially get the lien released through settlement.

If foreclosure is threatened:

This is the most serious stage. But even here, there are processes that must be followed. Notice requirements. Redemption periods. Potential defenses based on procedural failures.

If you're at this stage, you need a lawyer immediately. Not next week. Now. Call us at 212-300-5196.

What You Should Do Right Now

If youre behind on your EIDL loan or worried about your ability to keep paying, heres what you should be doing:

Review your loan documents. Understand what you actually signed. Is there a personal guarantee? Were there UCC filings? What security interests exist?

Assess your actual financial situation. Whats your income? What are your assets? What does your house equity look like? This information matters for every option going forward.

Dont ignore correspondence. Those letters from the SBA or Treasury arent going away. Ignoring them just reduces your options and accelerates collection.

Get professional help early. The earlier you address this, the more options you have. Waiting until theres a judgment against you is waiting too long.

At Spodek Law Group, we help people navigate EIDL default situations every day. Todd Spodek and our team understand both the federal collection process and the asset protection strategies that can help.

We treat every client like family. We don't judge you for how you got here. We focus on where you are now and whats the best path forward.

The Bottom Line on Your House

Can the SBA put a lien on your house for EIDL default? Yes, they can - through the judgment process, not through the original loan documents.

Will they definitely do so? Not always. It depends on the size of your debt, your other assets, and whether they pursue a judgment.

Can you protect your home? Often yes, but it requires taking action before things get worse.

The "no collateral" language from your original loan dosent protect you from collection. The personal guarantee you signed exposes your personal assets. And federal debt collection is more powerful than most people realize.

But none of this means youre helpless. There are options. There are strategies. There are ways to protect what matters most to you.

The key is getting help now, not later.

Call Spodek Law Group at 212-300-5196. Tell us your situation. Let us help you understand your options and build a plan to protect your home and your future.

Becuase heres what we know from experience: people who address these problems early almost always end up in better positions than people who wait. Dont let fear or embarrassment keep you from getting the help you need.

We're here. We understand. And we'll fight for you like family.

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Spodek Law Group represents clients nationwide in EIDL default matters, SBA debt negotiation, and asset protection. Contact us at 212-300-5196 for a confidential consultation about your situation.