VCP submission for defaulted loan

[Cynchbeast]

I am preparing a VCP submission for a defaulted loan. Participant and sponsor "forgot" to continue payroll deductions and we discovered non-payment when working on 2012 trust accounting.

The participant took out a second loan which was sufficient to pay off the first prior to the original maturity date of the first loan. She is now making payments on the second loan.

Technically, it seems the second loan is irrelevant; it shouldn't matter where she got the money to pay off the first. What I want to know from those of you how have some experience with submissions on defaulted loans is should I include mention of the new loan to payoff the first or should I omit those details? I don't know if it would be helpful or harmful to the client's position with the IRS.