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Statute of limitations on collection of SBA loan on failed business

San Diego, CA |

My business failed in 2008 and my SBA loan went into default. I have made no payments since 2008, they have not made any collection efforts. When I got the loan, they took a "third position" on my house. Now I want to sell my house. Has the statute of limitations run out on collection of the loan??? How can I get the loan off my title??


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Attorney answers 3


The statute of limitation applies to the SBA's legal right to sue and get judgment on the unpaid loan. The lien remain on your house and they have the right to enforce the lien. The SBA can foreclose or negotiate a payment through escrow.

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Your loan is secured by your interest in the house. It is unlikely the statute of limitations has run out on an amortized home loan especially without any collection efforts. In any event, it will not prevent the lender from recovering the full amount due on the note upon sale of the property. In short, you cannot "get the loan off title."

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In order to remove the SBA's deed of trust (TD) from your property's title, you need to prove you have paid it off. The statute of limitations to sue on a breach of a written contract in California is within four years after the date of the breach. However, as my colleagues properly point out, the running of this statute of limitation does not invalidate the TD lien, nor does is affect the TD holder's power of sale. Take a look at Section 882.020 of the California Code of Civil Procedure at the link below. Be sure to consult your own attorney to protect your legal rights.

Robin Mashal

Robin Mashal

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