Legal Question in Business Law in California
Litigation with US Small Business Administration
I received a disaster loan from the US Small Business Administration. My wife divorced me and was awarded the business by court order. I continued to make payments to SBA untill the business was sold. I notified SBA by letter that the business was to be sold and I wanted SBA to give me a document showing that I was releived of responsibility for the loan. During February of 2001 I again contacted SBA and requested a letter showing I was off the loan, I did that because I bought a new car and my credit report showed the loan on it, at this time when I contacted SBA I was told the loan had not been paid for over two years. Now SBA has bought litigation against me and are commencing to garnishe my military retirement. I have shown SBA copies of all the letters and Memo's I made of contact with SBA trying to get them to act when the business was in escrow. Is there anything I can do? According to SBA regulations I can only send my documents to a judge that works for the SBA that will review the information submitted and make a decision as to them taking my retirement pay. Seems to me the deck is stacked against me. How can I get a fair hearing on this issue. Thanks for any help.
2 Answers from Attorneys
Re: Litigation with US Small Business Administration
Did they already bring the lawsuit and receive a default judgment against you? If so it is going to be very difficult. You will need to file a Motion to Set Aside the Judgment.
Joel Selik
Attorney at Law
California and Nevada
800-894-2889
www.4thelaw.com
Re: Litigation with US Small Business Administration
It looks to me as though at the root of your problems is trying to do deals without legal representation.
First, changed ownership of the business does not necessarily terminate your personal liability as guarantor on the SBA loans.
Next, your divorce should have allocated responsibility for liabilities as well as apportioning the assets you and your wife owned. This would certainly be true in a California divorce and probably in Nevada as well. You should have received something in offset of your continued liability to the SBA.
Next, dealing with an agency such as the SBA often involves administrative law and administrative remedies before you are entitled to go to the regular court system.
Finally, whenever legal action is initiated against you, you need to take appropriate action at once, and only the foolhardy would risk assuming their own defense against an agency suit involving quite a bit of money (as I assume is the case here).
You need to get local legal representation in the state and county where the lawsuit or other legal action is pending. Your attorney should start by reviewing the SBA loan documents and the personal guarantees you executed; then, the divorce property settlement; the sale of the business; and finally the papers in the proceeding against you.
If you have a defense, and if there is a way to escape liability and/or pin it on someone else such as your ex-wife or the new owner of the business, you need to act promptly, and through local counsel.
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