It is possible for an SBA loan to be forgiven after a business ceases operation and liquidates all of its assets, says the Houston Chronicle. Once the liquidation pays the lender, the SBA starts the process of negotiating the forgiveness of the loan.
A small business owner usually uses debt forgiveness as a last resort when his business fails. The process of negotiating debt forgiveness with the SBA is imperative for a small business that provided a personal guarantee, because any personal assets are at risk for collection or foreclosure, says the Houston Chronicle. Negotiating debt forgiveness with the SBA helps preserve the business owner's personal assets.