How Can I Assume an SBA Disaster Loan as the Administrator of My Deceased Parent’s Estate?
Detailed Answer
When a borrower dies, the U.S. Small Business Administration (SBA) does not automatically cancel a disaster loan. The estate’s personal representative—in North Carolina commonly called an administrator—may step into the borrower’s shoes and assume responsibility for the loan. To do so, follow these key steps under both SBA rules and North Carolina probate law.
1. Obtain Appointment as Administrator
First, file a petition in the Clerk of Superior Court’s office to open probate and to be appointed as the estate’s administrator. Under North Carolina law (see N.C.G.S. § 28A-6-1 and 28A-7-1), you must submit:
- Original death certificate
- Certified copy of the will (if one exists) or an affidavit of intestacy
- Petition for Letters of Administration
Once approved, you receive Letters of Administration. These letters give you the legal authority to manage the estate’s assets and debts.
2. Notify the SBA of the Borrower’s Death
Contact the SBA Disaster Assistance Office handling the loan. Provide:
- Certified death certificate
- Copy of your Letters of Administration
- Loan number and original promissory note
Written notice triggers SBA review of your request to assume the loan.
3. Submit an Assumption Request
Complete SBA Form 355—a request for release of liability or assumption of obligation. Include:
- Personal financial statement for the estate and, if required, for you personally
- Appraisal of any collateral securing the loan
- Estate inventory under N.C.G.S. § 28A-17-1 through 28A-17-6
The SBA uses this information to assess whether the estate (or you personally) can meet payment obligations.
4. SBA Review and Approval
The SBA evaluates creditworthiness, collateral value and estate liquidity. If approved, the SBA will send an assumption agreement. When you sign and return that agreement, you officially assume responsibility for remaining loan payments under the original terms.
5. Estate Payment and Administration
As administrator, you must use estate funds—and if necessary, liquidate nonexempt assets—to make ongoing payments on the assumed loan. North Carolina law requires you to pay valid debts before distributing any inheritance to heirs (see N.C.G.S. § 28A-13-1 through 28A-13-3).
Helpful Checklist for Assuming an SBA Disaster Loan
- File for Letters of Administration (N.C.G.S. § 28A-6-1, 28A-7-1)
- Obtain certified death certificate
- Notify SBA Disaster Assistance Office with documents
- Complete SBA Form 355 (Assumption/Release request)
- Provide estate inventory and personal financial statement
- Await SBA underwriting decision
- Sign and return SBA assumption agreement
- Manage loan payments using estate assets (N.C.G.S. § 28A-13-1 through 28A-13-3)
Next Steps and Call to Action
Assuming an SBA disaster loan requires careful navigation of federal lending rules and North Carolina probate procedures. Pierce Law Group’s attorneys have guided many families through estate administration and lender negotiations. If you need help obtaining Letters of Administration, preparing your assumption request, or managing estate debts, contact us today. Email us at intake@piercelaw.com or call (919) 341-7055 to schedule a consultation.
