Can the SBA Put a Lien on My House for EIDL Default?
So your EIDL loan is in default or heading that direction, and your suddenly terrified that the SBA is going to come after your house. Maybe you read something online about federal liens on real estate, or maybe someone told you the government can seize property to satisfy debts, and now your lying awake at night wondering if you could lose your home over this loan. You didn’t pledge your house as collateral when you applied for the EIDL—you remember that part clearly—so it doesnt make sense that they could take it, right? But then again, this is the federal government we’re talking about, and they have powers private lenders don’t have, so maybe they CAN put a lien on your house even though you didnt agree to it. The uncertainty is eating at you, because your home is probably your most valuable asset and losing it would be devastating.
Here’s what you need to know: **The SBA did NOT require you to pledge your personal residence as collateral when you took out your COVID-19 EIDL loan—the SBA explicitly stated that personal residences would not be taken as collateral for EIDL loans**. However, that doesnt mean your home is completely safe from liens if you default. Here’s the critical distinction: The SBA didnt take a collateral lien on your home when you got the loan, but if you signed a personal guarantee (required for loans over $200,000) and you default, the SBA can sue you personally, obtain a judgment against you, and then record a judgment lien on your home and any other real estate you own. A judgment lien is different from a collateral lien—it’s not something you agreed to when you got the loan, it’s something the SBA can obtain through legal action after you default. So while your home wasnt collateral for the original loan, it can still end up with a lien if the SBA takes you to court and wins a judgment.
This article explains the difference between collateral liens and judgment liens, what the SBA actually took as collateral for EIDL loans, when personal guarantees make you vulnerable to judgment liens on your home, how the SBA obtains and records judgment liens, whether the SBA can actually force the sale of your home to satisfy the debt, what typically happens in practice versus worst-case scenarios, and what you can do to protect your home if your facing EIDL default. If your worried the SBA might put a lien on your house, understanding the actual risks and legal process is essential.
What Did the SBA Actually Take as Collateral for EIDL Loans?
When you applied for a COVID-19 EIDL loan, the SBA’s collateral requirements depended on the loan amount, but personal residences were explicitly excluded regardless of loan size:
Loans under $25,000: These loans were completely unsecured, meaning the SBA didnt require ANY collateral—no business assets, no equipment, no real estate, nothing. The loan was made based on your business’s need and basic creditworthiness, but there was no property pledged to secure it. If you borrowed less than $25,000, the SBA has no collateral lien on anything you own.
Loans between $25,000 and $200,000: For these loans, the SBA required a blanket lien on all business assets. This was documented through a UCC-1 financing statement filed with your state, which gives the SBA a security interest in business property—equipment, inventory, accounts receivable, furniture, vehicles owned by the business, and similar assets. However, this lien covered BUSINESS assets only, not your personal property, and definitely not your personal residence. If you owned the building where your business operated and that building was titled in the business’s name, the SBA might have a lien on that commercial property, but not on your home.
Loans over $200,000: The SBA still required a blanket UCC lien on all business assets, but personal residences were still excluded. The SBA did, however, require personal guarantees from anyone owning 20% or more of the business, which creates a different kind of risk to your home (discussed below). But even for these larger loans, your home was not pledged as direct collateral for the loan.
The SBA made this policy explicit in there EIDL program guidance: Personal residences would not be required as collateral for COVID-19 EIDL loans. This was different from some traditional SBA disaster loans where homes could be taken as collateral in certain circumstances. For COVID EIDL, the SBA wanted to make the loans accessible and didnt want borrowers to feel they were risking there homes by applying. So if your worried the SBA has a collateral lien on your house from when you got the loan, you can relax on that specific concern—they don’t.
So How Can the SBA Still Put a Lien on My Home?
The answer is through a judgment lien, which is completely different from a collateral lien. Here’s how it works:
If you signed a personal guarantee on your EIDL loan (required for loans over $200,000), you’re personally liable for the debt if the business defaults. The personal guarantee makes YOU the debtor, not just the business. When you default, the SBA (or the Department of Treasury if the debt has been referred for collection) can sue you personally to collect the debt. If they win the lawsuit—which they almost certainly will if the debt is valid and you legitimately owe it—the court issues a judgment against you for the amount owed plus interest, penalties, and court costs.
Once the SBA has a judgment against you, they can record that judgment as a lien against any real property you own, including your personal residence. This is called a judgment lien. In most states, judgment liens attach automatically to real estate in the county where the judgment is recorded. So if the SBA gets a $250,000 judgment against you and records it in the county where you own your home, a $250,000 lien attaches to your house even though your house was never collateral for the original loan.
The judgment lien doesn’t mean the SBA can immediately seize and sell your home (more on that below), but it does mean that the lien must be satisfied before you can sell or refinance the property. If you try to sell your house, the title company will discover the SBA’s judgment lien during the title search, and the lien will have to be paid from the sale proceeds before you receive any money. If you try to refinance to get a better interest rate or pull out equity, the lender will see the judgment lien and will likely refuse to refinance until it’s resolved, because there lien would be subordinate to the SBA’s judgment lien.
So to summarize: The SBA didnt take your home as collateral when you got the loan, but if you personally guaranteed the loan, defaulted, got sued, and the SBA obtained a judgment, they can record that judgment as a lien on your home after the fact. It’s not a collateral lien—it’s a judgment lien that comes from legal action, not from the original loan agreement.
Personal Guarantees and Your Exposure to Judgment Liens
Whether your home is at risk for a judgment lien depends almost entirely on whether you signed a personal guarantee:
If you did NOT sign a personal guarantee (loans of $200,000 or less generally): The SBA’s lawsuit would be against the business entity only, not against you personally. If they win a judgment, the judgment is against the business, and any judgment lien would attach to property owned by the business—not to your personal residence (assuming your house is titled in your personal name, not in the business’s name). Your home is protected by the corporate veil that separates you individually from the business entity. While the business might face collection actions, YOUR personal assets including your home are generally beyond the SBA’s reach without a personal guarantee.
If you DID sign a personal guarantee (required for loans over $200,000): You can be sued personally, a judgment can be obtained against you individually, and that judgment can be recorded as a lien on your personal residence and any other real estate you own in your personal name. The personal guarantee eliminated the corporate veil protection and made you individually liable, which means YOUR assets—including your home—are at risk if the SBA pursues collection through litigation and obtains a judgment.
This is why the personal guarantee requirement for loans over $200,000 is so significant. It’s not just about whether the SBA can garnish your wages or levy your bank accounts—it’s also about whether they can place liens on your home, your vacation property, rental properties you own, land you inherited, and any other real estate titled in your name. Without the guarantee, your home is safe. With the guarantee, it’s potentially at risk if the SBA goes to court.
Can the SBA Actually Force the Sale of My Home?
Having a lien on your home and forcing the sale of your home are two very different things. Here’s what the SBA can and cannot do:
What the SBA CAN do with a judgment lien: They can record the lien, which attaches to your property and must be satisfied when you sell or refinance. They can prevent you from selling or refinancing until the lien is paid (because title companies and lenders won’t close transactions with unresolved liens in most cases). They can wait—judgment liens are valid for many years (often 10-20 years depending on state law) and can be renewed, so the SBA can sit on the lien and collect when you eventually sell or die and the property goes through probate. The lien also accrues interest, so the amount you owe grows over time while the lien sits on the property.
What the SBA generally does NOT do: Force the sale of your primary residence to satisfy the debt. While the SBA theoretically has the legal right to execute on a judgment lien by initiating foreclosure proceedings or seeking a court-ordered sale of the property, this is extremely rare in practice for primary residences. Forcing someone out of there home is expensive (litigation costs, sheriff sales, public relations problems), time-consuming, and often doesn’t net much money after paying off any senior liens like mortgages and after applying homestead exemptions that protect a certain amount of equity in many states. The SBA’s cost-benefit analysis usually doesn’t support forcing sale of primary residences, so they typically record the lien and wait for you to sell voluntarily.
However—and this is important—just because the SBA doesnt typically force sales doesnt mean they CANT. If you have substantial equity in your home (you own it outright or have paid down most of the mortgage), if the debt is very large, if there are no other assets to collect from, and if the SBA is being particularly aggressive, they could theoretically initiate proceedings to force sale. It’s rare, but it’s not impossible, and you shouldnt assume your home is completely untouchable just because forced sales are uncommon.
Also, if the property is NOT your primary residence—if it’s a vacation home, rental property, or investment land—the SBA is much more likely to pursue forced sale because those properties don’t have the same legal protections and emotional/political considerations as someone’s primary home.
What Actually Happens in Practice When You Default on EIDL With a Personal Guarantee?
Here’s the realistic collection timeline and what typically happens regarding your home:
0-180 days of delinquency: The SBA sends letters and makes calls trying to collect. They might offer payment plans or accommodations. No legal action yet, no liens.
180+ days of delinquency: The loan is typically referred to the Treasury Department’s Bureau of the Fiscal Service for collection. Treasury uses administrative collection tools like tax refund offset and wage garnishment (if you have a personal guarantee). Still no lawsuit, still no judgment lien on your home.
1-3 years of delinquency (varies widely): If administrative collection isn’t working and the debt is large enough to justify litigation costs, the case might be referred to the Department of Justice for legal action. The DOJ files a lawsuit against you (if you personally guaranteed) or against the business entity (if you didnt). You’re served with the lawsuit and have an opportunity to respond, though in reality there’s often not much defense if you legitimately owe the debt and signed a valid personal guarantee.
Judgment obtained (timing varies): The SBA/DOJ wins the lawsuit (either through default judgment if you don’t respond, or through summary judgment because there’s no genuine dispute about the debt). The court issues a judgment for the amount owed plus interest, penalties, and costs. Once the judgment exists, the SBA can record it as a lien in any county where you own real estate.
After judgment lien recorded: In most cases, the SBA doesn’t immediately try to force sale of your home. Instead, they rely on other collection tools (wage garnishment, bank levies, tax refund offsets) to collect what they can, and the judgment lien sits on your home accruing interest. If you try to sell or refinance, the lien has to be paid. If you don’t sell and you don’t pay, the lien just sits there—potentially for decades.
So the realistic outcome for most borrowers who default with a personal guarantee is: Judgment lien recorded on your home, lien remains until the debt is paid or you sell the property, but you continue living in your home without being forced out. It’s not a great situation (the lien limits your options and grows over time), but it’s not the nightmare scenario of being evicted by federal marshals either.
How to Protect Your Home If You’re Facing EIDL Default
If your facing EIDL default and your worried about liens on your home, here’s what you should (and shouldnt) do:
DON’T transfer your home out of your name to try to hide it from creditors. This is called a fraudulent conveyance, and it can result in the transfer being undone by the court, criminal charges for fraud, and making your situation much worse. Courts can “claw back” fraudulent transfers and reverse them, and they look very skeptically at transfers made after debts exist or litigation starts. If you transfer your home to your spouse, your kids, or a trust right before or after defaulting on the EIDL, expect the SBA to challenge it as fraudulent, and expect to lose.
DO understand your state’s homestead exemption. Many states have homestead exemption laws that protect a certain amount of equity in your primary residence from creditors. For example, if your state has a $50,000 homestead exemption and you have $60,000 of equity in your home, only $10,000 of that equity would be available to satisfy the SBA’s judgment—the first $50,000 is protected. Homestead exemptions vary dramatically by state (from nearly nothing in some states to unlimited in a few states like Florida and Texas), so research your state’s law. If your home equity is fully protected by the homestead exemption, the SBA is unlikely to pursue forced sale because there’s nothing to collect.
DO consider whether bankruptcy makes sense. Filing bankruptcy can eliminate your personal liability for the EIDL debt, which prevents the SBA from obtaining a judgment and recording a judgment lien in the future. If you file bankruptcy before the SBA sues and gets a judgment, the bankruptcy discharge eliminates the debt, and no lien is ever recorded. If the SBA already has a judgment lien on your home when you file bankruptcy, the situation is more complex—the bankruptcy might discharge your personal liability for the debt, but the lien might survive bankruptcy as a secured claim against the property (you’d need to consult with a bankruptcy attorney about lien stripping or lien avoidance depending on your specific situation and the type of bankruptcy).
DO try to settle the debt before it gets to judgment. If you can negotiate an offer in compromise or settlement with the SBA before they sue and get a judgment, you can resolve the debt without ever having a lien recorded on your home. Once a judgment exists, settlement becomes harder because the SBA has less incentive to compromise—they already have a legally enforceable judgment and a lien that will eventually be paid when you sell or die. Settling before judgment gives you more leverage and avoids the lien problem entirely.
DO keep making some payments if possible. Borrowers who make partial payments while trying to work out accommodations are less likely to be sued quickly than borrowers who stop paying entirely with no communication. Even small payments show good faith and might delay litigation long enough for you to explore settlement or bankruptcy options.
DON’T assume your home is automatically safe just because you didnt pledge it as collateral. If you signed a personal guarantee, your home IS at risk for a judgment lien even though it wasnt original collateral. Don’t make financial decisions based on the assumption your home is untouchable.
What If the SBA Already Has a Lien on My Home?
If the SBA already obtained a judgment and recorded a lien on your home, here are your options:
Pay the judgment in full. If you have the resources (cash savings, retirement accounts you’re willing to tap, family members who can lend you money), paying the judgment eliminates the lien. The SBA releases the lien, and your home is clear. This is expensive and painful, but it’s the cleanest solution if you have the money.
Negotiate a settlement of the judgment. Even after a judgment exists, the SBA sometimes accepts less than the full amount to satisfy the debt, especially if your financial situation has deteriorated and they realize full collection is unlikely. If you can make a lump-sum offer (say, 50% of the judgment amount paid immediately), the SBA might accept it and release the lien. This requires negotiation and usually requires demonstrating inability to pay the full amount.
File bankruptcy to discharge the underlying debt. Bankruptcy can eliminate your personal liability for the judgment, though the lien might survive and remain attached to the property (this depends on the type of bankruptcy, the amount of equity in your home, exemptions available, and whether lien stripping or lien avoidance is possible). Consult with a bankruptcy attorney about whether bankruptcy would eliminate the lien or just eliminate your personal obligation while the lien remains.
Wait it out (not recommended). Judgment liens eventually expire (often after 10-20 years depending on state law), but they can be renewed, and they accrue interest while they sit. If you plan to stay in your home until you die and you have no plans to sell or refinance, you could theoretically just ignore the lien, and it would be paid from your estate after death. This is not a great plan because the debt grows substantially over time with accruing interest, and it limits your financial flexibility.
Sell the property and pay the lien from proceeds. If you need to sell your home for other reasons (downsizing, relocating, financial necessity), the lien will be paid from the sale proceeds at closing. If there’s enough equity to cover the lien plus any mortgage and selling costs, you’ll receive whatever is left. If there’s not enough equity, you might have to bring money to closing or negotiate a short sale where the SBA accepts less than the full lien amount because that’s all the available proceeds.
Talk to an SBA Debt Attorney Today
The SBA didnt take your home as collateral when you got your EIDL loan, but if you signed a personal guarantee and you default, they can obtain a judgment and record a lien on your home that must be satisfied before you can sell or refinance. While forced sales of primary residences are rare, the lien is still a serious problem that limits your financial options and grows over time with interest.
Our firm helps EIDL borrowers protect there homes from SBA liens. We negotiate settlements and offers in compromise before litigation to avoid judgments and liens altogether. We defend against SBA lawsuits when defenses exist. We represent clients in bankruptcy proceedings to eliminate EIDL debt and address existing liens. We advise on asset protection strategies that are legal and effective. And we challenge fraudulent or improperly recorded liens when appropriate.
If your facing EIDL default and your worried about a lien on your home, contact us today for a free consultation. We’ll review whether you signed a personal guarantee and whether your home is actually at risk. We’ll evaluate whether the SBA has already filed suit or is likely to do so. We’ll assess whether settlement, bankruptcy, or other strategies make sense for your situation. We’ll explain your state’s homestead exemption and how much protection it provides. And we’ll develop a strategy to protect your home while addressing the debt. The consultation is free and confidential, but it could be the difference between losing your home and protecting it.
Your home is probably your most valuable asset—don’t risk it without understanding your options. Call us now.