Summary
COVID Economic Injury Disaster Loans were never forgivable. Only the separate EIDL Advance grants did not require repayment. With more than 1.3 million borrowers in default across roughly $47 billion, an industry has grown up around selling relief that does not exist. This article explains what is actually available, what is not, and how to identify an operation that is selling paperwork.
Start With What the Government Says
The clearest statement on this comes from the SBA itself. The agency’s Offer in Compromise form, Form 1150, carries an instruction that it may be submitted only after liquidation of all collateral under agency guidelines, and states that COVID EIDLs are not able to be forgiven.
That is the government’s own document, on the government’s own website, saying the thing that half the internet says otherwise.
Treasury has been similarly direct on a related point. Its Bureau of the Fiscal Service has posted a notice warning that there may be misinformation online falsely suggesting Treasury can return COVID EIDL and PPP debts to the SBA, and confirming that it cannot. The government does not usually publish notices about online misinformation. It did here because the volume of it is significant.
Where the Confusion Comes From
The confusion is understandable, because three different things were happening at once during 2020 and 2021.
PPP loans were forgivable. They were designed to convert to grants if the borrower met payroll and other requirements, and most did. Many business owners took both a PPP loan and an EIDL, had the PPP forgiven, and reasonably assumed the same would eventually happen with the other one.
EIDL Advances were grants. The initial advance, the Targeted Advance, and the Supplemental Targeted Advance never had to be repaid. A borrower who received $10,000 that was never collected, and separately a $150,000 loan, may not clearly recall which was which.
The SBA repeatedly deferred payment. Deferments were extended more than once, eventually to 30 months from the date of the note. Years passed with no payment demanded. Deferral is easy to mistake for forgiveness when nothing arrives in the mail for three years.
None of that changes the loan terms. A COVID EIDL was a 30-year loan at a fixed rate, 3.75 percent for businesses and 2.75 percent for nonprofits, and it was always repayable.
Why the Pitch Is Landing Now
The timing of the current wave of solicitations is not coincidental.
The Hardship Accommodation Plan, the last widely available forbearance program, ended in March 2025. The SBA’s temporary permission to keep servicing defaulted COVID EIDLs itself, rather than referring them to Treasury, expired on March 31, 2026. Following that expiration the agency reported sending roughly 562,000 pandemic-era loans worth about $22 billion to Treasury and the Justice Department.
The result is a very large population of frightened people receiving official-looking mail for the first time in years, at the same moment their options genuinely narrowed. That is a marketing opportunity, and it has been treated as one.
How to Recognize the Operations
Certain claims are reliable indicators, because each one is inconsistent with how the system actually works.
“You may qualify for EIDL forgiveness.” No such program exists. This is disqualifying on its own.
“We can settle your EIDL for pennies on the dollar.” The SBA continues to accept Offer in Compromise paperwork, on Forms 1150 and 770, but eligibility requires the business to be permanently closed with all collateral liquidated, and reporting through 2026 indicates no confirmed approvals for COVID EIDL borrowers. A company promising a specific settlement percentage on a channel with essentially no confirmed approvals is describing an outcome it cannot produce.
“We have contacts at the SBA.” Debt resolution is administrative. There is no relationship that changes an eligibility determination.
“Stop communicating with the SBA and let us handle it.” This advice reliably damages the borrower. Deadlines run regardless, most importantly the 15-business-day window to request a hearing before an administrative wage garnishment order issues. Silence does not pause anything.
“Pay the full fee upfront.” Advance-fee structures on a service with a near-zero success rate transfer all of the risk to you.
“We can get your loan sent back to the SBA.” Treasury has published a notice specifically stating it cannot do this.
A guarantee of any particular result. Nobody can guarantee a discretionary government determination. A lawyer who guarantees an outcome is violating professional conduct rules, and a company that does so is not bound by them at all.
What Is Actually Available
The honest list is shorter than the advertised one, and it is not empty.
Payment arrangements. The SBA can discuss options on loans it still services, and Treasury can set up arrangements based on ability to pay on debts it has taken over. This resolves cash flow rather than principal, but for some borrowers that is the entire problem.
Confirming that you are not liable. COVID EIDLs at or above the $200,000 threshold generally required a personal guaranty. At or below it, they generally did not. A meaningful number of people being pursued personally are not personally liable, and establishing that costs a document review rather than a settlement fee. This is the single most underused option.
Administrative hearings. Before a wage garnishment order issues, you have the right to request a hearing. Requested within 15 business days of the notice date, the order generally will not go to your employer while the hearing is pending. A federal agency also generally cannot garnish the wages of someone in their current job less than 12 months who was involuntarily separated from the prior one.
Bankruptcy. This is the mechanism that actually eliminates the debt. Nothing in 11 U.S.C. § 523(a) exempts SBA or EIDL debt from discharge, so an EIDL taken in good faith is dischargeable like other unsecured debt. Chapter 7 typically produces a discharge in three to four months. Subchapter V of Chapter 11 restructures the debt for a business that intends to keep operating. Referral to Treasury does not affect dischargeability.
An Offer in Compromise on a traditional SBA loan. If the debt is a 7(a) or 504 loan rather than a COVID EIDL, the OIC process has a genuine history of approvals and deserves serious consideration. The distinction between loan programs matters more here than anything else.
A Note on How to Read Fee Structures
One practical test cuts through most of it. Ask what specifically will be filed, with whom, and what the realistic range of outcomes is, including the bad ones.
A legitimate professional will name the document, name the decision maker, and describe how it can go wrong. An operation selling hope will redirect to how much you might save. The difference is audible in the first ten minutes of a phone call.
If you are not sure, a second opinion from a bankruptcy lawyer costs a consultation. Most of us do not charge for the initial conversation, and a good part of that conversation is often telling people they do not have the problem they think they have.
Frequently Asked Questions
Was any part of my EIDL forgivable?
Only the EIDL Advance grants, which were separate from the loan and were never repayable.
Is Congress going to forgive these loans?
Legislative proposals to provide COVID EIDL relief have been discussed, and congressional interest has increased as collection activity has intensified. Nothing has been enacted. Making a decision today on the assumption that relief will arrive is a substantial risk, particularly while a collection fee sits on the balance and garnishment proceeds.
I already paid a company thousands of dollars. Can I recover it?
Possibly, depending on what was promised, what was delivered, and your state’s consumer protection statutes. Keep every document and communication. Complaints can also be filed with the Federal Trade Commission, your state attorney general, and the SBA Office of Inspector General.
Does bankruptcy really discharge an SBA loan?
Yes, in the ordinary case. The exception is a loan obtained through fraud, which 11 U.S.C. § 523(a)(2) excepts from discharge, and which the creditor must raise within 60 days after the first meeting of creditors.
How do I verify anything I have been told?
Read the SBA’s own materials at sba.gov and Treasury’s at fiscal.treasury.gov. Both agencies publish the actual rules. Where a company’s claims conflict with the agency’s own forms, the forms are correct
This article is general information and is not legal advice. Jenny R. Kasen is the founding attorney of Kasen Law Group, P.C., and practices before the United States Bankruptcy Courts for the District of Delaware, the District of New Jersey, the Eastern District of Pennsylvania, and the Southern District of Florida.