SBA Debt Attorneys

An SBA Offer in Compromise is not possible if the liability of the debtor is clear and the SBA can collect fully without protracted litigation. The amount offered for settlement must bear a reasonable relationship to the estimated value of the projected amount of recovery available through enforced collection. An SBA OIC is not available when the obligor has the ability to pay the deficiency in full within a reasonable time frame – generally, no later than 5 years. An OIC cannot be accepted if there is any evidence or knowledge of fraud, substantial misrepresentation, or financial dishonesty on the part of the offeror.

Even if your business incorporated (i.e. corporation, Limited Liability Company), almost all lenders and the SBA required that you sign personal guarantees as part of the initial loan funding process. Therefore, despite the fact that your business entity signed on the Loan Agreement with the bank or CDC, you would still be liable as a result of the personal guaranty that you or any other individuals signed. The personal guaranty, upon default on the loan, gives the bank or CDC and the SBA direct access to your personal assets such as your home, personal bank accounts, investments, real estate, etc.

Chapter 11 of the US bankruptcy code focuses on “reorganizing” a business. This allows it to stay alive while restructuring debt and making a plan to repay creditors over time.

For many struggling businesses, the Chapter 11 Subchapter V is a long-awaited life preserver. A traditional Chapter 11 was extremely expensive for businesses. Businesses hope it eliminates some of the bureaucratic pitfalls of The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA).

The BAPCPA was supposed to make filing for Chapter 11 easier. Instead, it included more reporting requirements and other burdens that bogged down the act and canceled out the benefits.

Subchapter V shares some similarities to the BAPCPA. Both have one-step confirmation, and both add new features that make filing for Chapter 11 easier for small businesses.

Subchapter V allows debtors to spread their unsecured debt over 3 to 5 years. During this time, the debtor must devote their disposable income toward the debt. This model usually aids both parties involved.

The debtors have time to pay their debts and can spread them across a more extended period to avoid large sums. The creditors benefit because there is less a chance of debtors defaulting on longer-term payments.

Administrative expenses differ from Subchapter V to Chapter 11 cases. Debtors must pay administrative costs at plan confirmation in Traditional Chapter 11 cases. Debtors can pay Subchapter V administrative expenses over the life of the plan.

For both, however, debts are not discharged until the debtor completes all of its planned payments.

‍

Each individual SBA OIC will be based on a case by case review of the Borrower’s or Guarantor’s individual financial situation and certain “litigative risks.” Factors that will be considered are:• An assessment of the debtor’s ability to pay and potential earnings capacity• Health and life expectancy• Local economic conditions• Equity in pledged or reachable assets• Settlement arrangements with other creditors• Applicable exemptions available to debtor under State and Federal law• The cost, time and risk of collection litigation