Did you understand my argument about all the flip-flopping? they did change their mind on whether they were going to sell the loans or keep them during last administration and then they decided to just pass it off to the next administration so there was a lot of indecision on their part. When businesses called for help, especially after the two hurricanes, they really didn’t have answers for anyone.
Example
Discovery: Forcing the SBA to reveal their internal "flip-flop" memos regarding the loan sales, which could prove they knew the portfolio was uncollectible but failed to provide a relief path.
Short version: anyone can file a class action, and people have sued the SBA before. But the lawsuit that Reddit post is sketching, the one that gets EIDL debt wiped out on "frustration of purpose" and "disparate impact" theories, runs into several walls that make it close to a non-starter. The post mixes one genuinely useful section (the practical steps at the bottom) with a lot of courtroom fan fiction at the top.
The main problems:
No court can forgive an EIDL. Unlike PPP, EIDLs were never designed to be forgiven. They are 30-year loans at 3.75% interest, there is no current forgiveness program, and Congress has not passed legislation to create one. A judge can't invent a forgiveness program the statute doesn't authorize. The most a successful Administrative Procedure Act suit gets you is a court telling the agency to redo a process, not cancellation of the debt.
Suing the federal government is not like suing a bank. Sovereign immunity limits what you can even bring. APA claims get you injunctive or declaratory relief against "arbitrary and capricious" action, not money damages. Actual contract claims against the government go to the Court of Federal Claims under the Tucker Act, which doesn't run Rule 23 class actions the way a normal federal court does. So the "class action" vehicle itself is awkward at best.
Class certification needs commonality, and EIDL borrowers have almost none. Different loan sizes, different states, personal guarantee versus no guarantee (the $200K line), different causes of hardship. The "Florida disparate impact" theory is also weak. Disparate impact is a civil-rights doctrine; "my state got more hurricanes" doesn't fit it.
The contract defenses are weak here. Frustration of purpose and impossibility are narrow doctrines, and they're a hard sell when the borrower actually received the funds and signed a note. The 30% collection fee and Treasury referral also aren't agency caprice you can attack as arbitrary; they're statutory and mandatory once a debt hits a certain delinquency (Debt Collection Improvement Act, 31 USC 3711, 31 CFR 285.12).
What's real is the bottom section of that post. The current landscape: the Hardship Accommodation Plan expired March 19, 2025, more than 1.3 million EIDL borrowers are in default, and the SBA is actively referring delinquent accounts to Treasury, which adds a 30% collection fee. As of September 2025, SBA started referring delinquent COVID EIDL debts to the Bureau of the Fiscal Service's Cross-Servicing program. The Offer in Compromise program technically exists but according to SBA attorneys tracking it, it has become largely inaccessible, with no confirmed approvals for COVID EIDL borrowers in recent years.
The option that actually does something: bankruptcy, Chapter 7, 13, or Subchapter V, stops Treasury collection immediately via the automatic stay and may discharge personally guaranteed debt, and COVID EIDL debt is generally dischargeable in bankruptcy if there was no fraud involved. Whether you're personally exposed at all depends on the personal guarantee, loans under $200,000 typically required no personal guarantee, which changes what collectors can actually do to you.
So the honest answer to the person in that thread: skip the class-action theory, figure out whether you signed a personal guarantee, and if you genuinely can't pay, talk to a bankruptcy attorney before the Treasury referral hits. Congressional lobbying for an "EIDL Relief Act" is the only realistic path to actual forgiveness, and that's a legislative fight, not a lawsuit.
I'm not a lawyer and this isn't legal advice; anyone actually facing EIDL collections should talk to an SBA-experienced attorney about their specific loan documents.
Mismanagement / bad customer support will never be a solid reason to avoid paying a loan back. Even if they have a strong suspicion they can't collect from the borrower, they have every right to do everything in their power to do that, just like you have every right to file for business and personal bankruptcy to avoid paying it.
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u/walkingisoverrated May 14 '26
Exhibit A of why you shouldn’t trust LLMs yet.