Legal Question in Credit and Debt Law in New York

Defalt on SBA loan

I have a loan thru the SBA for my business. I only owe around 117,000 on the property and it was appraised for 210,000. Recently I had a fire in my apartment which is the basement/lower level of the building. I have insurance to cover the damages. There was no stuctural damage to the building due to the fire, just smoke damage. What reprecussions could I face if I default on the loan and do not used the insurance money to fix the business?

Thank you..


Asked on 3/26/03, 3:30 pm

2 Answers from Attorneys
Debra Palazzo Law Offices of Debra Palazzo, LLC

Re: Defalt on SBA loan

If SBA holds the mortgage on the building they will foreclose. If you don't repair the smoke damage the bldg will sell for under mkt value. The SBA will then go for a deficiency judgment against you if the bldg sells for less than amount owed. You should try and sell it yourself before defaulting on loan.

Read more
Answered on 3/26/03, 9:41 pm
Kenneth J. Ashman Ashman Law Offices, LLC

Re: Defalt on SBA loan

In addition to the mortgage that the SBA holds on the property, it also (undoubtedly) has your personal guarantee. This means that if the SBA cannot recover the full amount of the loan with all appropriate interest, then you have exposure to personal liability -- thereby potentially eating up the amount you would have received from the insurance company to fix the building that you pocketed.

-- Kenneth J. Ashman; www.AshmanLawOffices.com

This communication is intended for general informational purposes only and is not intended to create an attorney-client relationship, which, under the policies of Ashman Law Offices, LLC, can only be created by execution of a formal retention agreement.

Read more
Answered on 3/27/03, 10:41 am


Related Questions & Answers

More Credit, Debt and Collections Law questions and answers in New York