As is the answer to many of life’s complex questions, the answer is….it depends.
Like dear old dad once told me, you can’t get something for nothing in this life. That axiom holds true with respect to settling SBA debt. I’ve had people call me looking to settle, and when I ask them how much they’d be able to offer as a settlement to the SBA, they reply “well, I don’t have anything to offer right now”. A case like that is dead in the water.
Many people are under the impression that just because they have difficult circumstances in their life, their lender or the SBA will simply let them walk away from the debt in exchange for nothing. As a borrower once put it, they want the SBA “to let this little fish swim away”. Unfortunately, that’s not something that is going to happen. Look at it from your lenders perspective. Why would they relieve you of your obligation to repay the debt in exchange for no consideration? If you can offer nothing, there is quite simply nothing to discuss. I’m yet to see a tale of woe (i.e. I lost my job, my house, my dog etc) that convinces a lender to simply forgive debt. Banks and the SBA are not charities, so don’t expect a handout.
Like most issues at a bank, the decision to settle debt is a business decision. Lenders tend to ask one question when evaluating an offer: what scenario will result in the best possible recovery for the bank? If you offer $10,000 in cash, and their alternative is trying to garnish your wages for 20 years, then they take the settlement. If you offer $10,000 in cash, and they can sell your home and clear $50,000, then they will foreclose. If a borrower understands that concept, it will make the settlement process a whole lot easier.
So to answer the original question of whether the SBA forgives loans? No. Does the SBA settle loans? The answer is yes, but only when it makes business sense to do so.