Currently Not Collectible (CNC) Status and Defaulted SBA Loans

 Currently Not Collectible (CNC) Status and Defaulted SBA Loans

“Currently Not Collectible” (CNC) status can, in limited cases, be used to temporarily pause collection activity on a defaulted SBA loan. 

CNC is not an SBA program and is not available immediately after default. 

It may only be requested once the loan has been charged off, assigned to the SBA, and referred to the U.S. Treasury or IRS for collection. 

At that stage, collection efforts may include the Treasury Offset Program, private collection agencies, or IRS cross-servicing. 

If the IRS is the active collector, a borrower may request CNC status by demonstrating financial hardship. 

To qualify, the borrower must show that there is no disposable income after basic living expenses. 

If approved, CNC may temporarily stop wage garnishments, levies, and aggressive IRS collection actions. 

However, CNC does not eliminate the SBA debt or stop interest from accruing. 

Tax refunds may still be intercepted, and the account can be reactivated if the borrower’s financial condition improves. 

Even with CNC status, the SBA retains the right to enforce guarantees and resume collection efforts in the future.

Borrowers or advisors with questions about defaulted SBA loans and borrower alternatives should contact Jim Shenwick, Esq

Jim Shenwick, Esq  917 363 3391  jshenwick@gmail.com

Please click the link to schedule a telephone call with me. https://calendly.com/james-shenwick/15min

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