How Do I Get Started With The SBA Offer In Compromise Process?

To determine if an SBA OIC is possible the following information must be provided; A completed and signed SBA Form 1150 Offer in Compromise which outlines the terms of the offer and why the offer is being made. Be sure to address all the items on the forms 'Instructions for Presenting the Offer' and 'Elements of a Workable Compromise Offer.' You should also discuss the settlement arrangements that are being made with other creditors. All offeror(s) must complete and sign an SBA Form 770 Financial Statement of Debtor and provide copies of the most recent two years of personal IRS Tax returns (or a copy of the Extension if not filed). The SBA Form 770 will be reviewed and compared with the original SBA Form 413 'Personal Financial Statement' completed at the time of loan approval. Valuations of property subject to judgment must be supported. Copy of a current paystub if you are employed. Additional information may be necessary depending on the individual circumstances of the transaction.

How much does a Subchapter V cost?

Filing fees with the court may vary but as of the time of this writing the filing fees are $1,738. Attorneys' fees will vary on the complexity of your case but will be in the $15,000 to $25,000 range in most cases. Under a regular Chapter 11, attorneys' fees were usually a minimum of $50,000.

How Does The SBA Offer In Compromise Process Work?

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.

When Should An SBA Offer in Compromise Be Pursued?

When certain limited circumstances occur and a Borrower or Guarantor does not have the ability to make full payment, the SBA may allow a settlement for less than the full principal amount due on the federal debt. An SBA Offer in Compromise (OIC) is not possible without the cooperation of responsible Borrowers and Guarantors. One of the basic elements of an SBA OIC is that the business has ceased operations and all business assets have been liquidated. The business owner's assistance and help in maximizing the recovery on the business assets will help to minimize the amount of deficiency balance on the loan. As in most scenarios involving debt forgiveness, there may be tax implications and small business owners should consult their tax and legal advisors before starting the SBA OIC process.

SBA Debt Attorneys | Nationwide SBA & Treasury Debt Defense

SBA Debt Attorneys

Owe more than $30,000? If yes, we can provide you realistic solutions to SBA loan problems and US Treasury Debt Collection Tactics.

Would you like to know more about your SBA loan problem?

The SBA Attorneys in our office want to help you resolve your SBA debt situation. No matter how difficult your circumstances may seem, the right SBA debt attorneys can assist you.

We understand that you may have questions regarding a wide range of federal agency matters, including how to respond to an SBA demand letter, what SBA loan foreclosure actually entails, and what is a Treasury Offset Program levy.

Our SBA Attorneys can explain all of these topics and more. We urge you to review our disclaimer and blog to learn more about subjects that may be confusing to you and to contact us right away if you have specific questions relating to your unique circumstances.

We look forward to helping you during this difficult and stressful period of your life.

Why Hire Us to Help You with Your Treasury or SBA Debt Problems?

Millions of Dollars in SBA Debts Resolved via Offer in Compromise and Negotiated Repayment Agreements without our Clients filing for Bankruptcy or Facing Home Foreclosure

Millions of Dollars in Treasury Debts Defended Against via AWG Hearings, Treasury Offset Program Resolution, Cross-servicing Disputes, Private Collection Agency Representation, Compromise Offers and Negotiated Repayment Agreements

Our Attorneys are Authorized by the Agency Practice Act to Represent Federal Debtors Nationwide before the SBA, The SBA Office of Hearings and Appeals, the Treasury Department, and the Bureau of Fiscal Service.

SBA Debt Default FAQs

How Does the SBA Assess An Obligor's Ability to Pay When Evaluating An SBA OIC?

The adequacy of an SBA OIC must begin with an evaluation of the assets of the obligor(s). The starting point is ordinarily the net present value of the forced sale value of such assets (not the loan balance). This value combined with the prognosis of the obligors’ earning power form the basis for determining the adequacy of the offer. The review must balance the right of the Government to collect the amount owed and the obligation to treat all obligors with dignity and fairness.

Do I Need To Hire An Attorney To Represent Me Before The SBA?

Yes. The Agency Practice Act (5 U.S. Code Section 500 et seq.) specifically authorizes attorneys in good standing of the bar of the highest court of their State to represent you before the U.S. Small Business Administration, the U.S. Department of Treasury and the Bureau of Fiscal Service. However, if you decide to hire a non-attorney firm or consultant to handle your SBA matter before the aforesaid federal agencies, be advised that this non-attorney firm or consultant are in violation of the Federal Agency Practice Act, and cannot advise you on any legal issues. The problem we have with non-attorney representation for SBA matters in this industry is that we do not believe these non-attorneys have the legal authorization and ability to advise or counsel you on any interpretation of SBA administrative law (such as the SBA’s SOPs, the Code of Federal Regulations (CFRs), SBA OHA decisions, bankruptcy issues, federal/state statutory law or federal case law). In addition, many of these non-attorney representatives are neither affiliate members of NADCO, NAGGL (SBA trade associations) nor authorized to practice before the Department of Treasury pursuant to the Agency Practice Act and Circular 230. Finally, in the event that you need to appeal your case to the SBA Office of Hearings and Appeals in connection with your SBA debt or any adverse decision that may be considered an abuse of discretion, the non-attorney representatives will NOT be able to cite to legal precedent or argue applicable law before the SBA’s Administrative Law Judge (ALJ) as any attempt on their part would arguably be the unauthorized practice of law, and would be useless since these non-attorneys wouldn’t have any clue as to how to proceed with representing your interests in this special forum as these individuals do not have the education, training or experience to administratively litigate your case and protect your interests.

If There Were Multiple Individuals Who Signed Personal Guarantees In Connection With Our SBA Loan, How Much Will Each Of Us Owe?

An SBA Guaranteed Loan with multiple personal guarantors considers each of the guarantors as being “jointly and severally” liable for the loan balance. This means that anyone who signed the loan as a borrower, obligor or a guarantor, is liable for the entire outstanding balance. Therefore, each and every guarantor can be pursued for the total loan balance. The problem that manifests with multiple guarantors after an SBA loan default is when certain individuals have more personal assets than others. Generally, lenders, the CDCs and the SBA target those personal guarantors who may have more assets than others. Hence, those individuals whose personal guarantees are “worthless” will generally not have to pay as much.

Does The Compromise With One Or More Obligor Release The Liability Of The Remaining Obligors?

A compromise with one or more Obligors does not release the continuing liability of any remaining Obligors. Each entity or individual responsible for the debt must develop its/his/her own SBA OIC.

Does Subchapter V help if I pledged my personal residence as collateral for a business loan?

If the principal debtor used his/her primary residence as security for a loan to fund the small business, there are available loan modifications.

If as part of your SBA loan, you pledged your primary residence as collateral, neither Chapter 7 or Chapter 13 bankruptcy will likely help in the event of default. However, Chapter 11 Subchapter V may help.

For instance, a small business debtor's plan may modify the rights of a holder of a claim secured by the principal residence of the debtor if the new value received in connection with the granting of the security interest was:

not used primarily to acquire the real property; and
used primarily in connection with the debtor's small business

Therefore, you could possibly use the Chapter 11 Subchapter V to save your house and modify the terms of repaying the loan if you pledged your house as collateral as part of your personal guarantee. You will, more than likely, not rid yourself of the lien. Preserving your home constitutes your goal with the new bankruptcy code. If you have no other options, you should explore the new bankruptcy option.

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$375,000 SBA 504 LOAN - SBA OIC CASH SETTLEMENT

The client personally guaranteed an SBA 504 loan balance of $375,000. Debt had been cross-referred to the Treasury at the time we got involved with the case. We successfully had debt recalled to the SBA where we then presented an SBA OIC that was accepted for $58,000.

$975,000 SBA 7A LOAN - SBA OIC CASH SETTLEMENT

Our firm successfully negotiated an SBA offer in compromise (SBA OIC), settling a $974,535.93 SBA loan balance for just $18,000. The offerors, personal guarantors on an SBA 7(a) loan, originally obtained financing to purchase a commercial building in Lancaster, California.

The borrower filed for bankruptcy, and the third-party lender (TPL) foreclosed on the property. Despite the loan default, the SBA pursued the offerors for repayment. Given their limited income, lack of significant assets, and approaching retirement, we presented a strong case demonstrating their financial hardship.

Through strategic negotiations, we secured a favorable SBA settlement, reducing the nearly $1 million debt to a fraction of the amount owed. This outcome allowed the offerors to resolve their liability without prolonged financial strain.

$150,000 SBA 7A LOAN – NEGOTIATED WORKOUT AGREEMENT

Client’s small business obtained an SBA 7(a) loan for $150,000. He and his wife signed personal guarantees and pledged their home as collateral. The SBA loan went into default, the term or maturity date was accelerated and demand for payment of the entire amount claimed was made. The SBA lender’s note gave it the right to adjust the default interest rate from 7.25% to 18% per annum. The business filed for Chapter 11 bankruptcy but was dismissed after 3 years due to its inability to continue with payments under the plan. Clients wanted to file for Chapter 7 bankruptcy, which would have been a mistake as their home had significant equity to repay the SBA loan balance in full as the Trustee would likely seize and sell the home to repay the secured and unsecured creditors. However, the SBA lender opted to pursue the SBA 7(a) Guaranty and subsequently assigned the loan and the right to enforce collection to the SBA. Clients then received the SBA Official 60-Day Notice and hired the Firm to respond to it and negotiate on their behalf. Clients disputed the SBA’s alleged balance of $148,000, as several payments made to the SBA lender during the Chapter 11 reorganization were not accounted for. To challenge the SBA’s claimed debt balance, the Firm Attorneys initiated expedited discovery to obtain government records. SBA records disclosed the true amount owed was about $97,000. Moreover, because the Clients’ home had significant equity, they were not eligible for an Offer in Compromise or an immediate Release of Lien for Consideration, despite being incorrectly advised by non-attorney consulting companies that they were. Instead, our Firm Attorneys recommended a Workout of $97,000 spread over a lengthy term and a waiver of the applicable interest rate making the monthly payment affordable. After back and forth negotiations, SBA approved the Workout proposal, thereby saving the home from imminent foreclosure and reducing the Clients' liability by nearly $81,000 in incorrect principal balance, accrued interest, and statutory collection fees.

SBA Debt Resolution Attorneys

SBA Debt Attorneys

Would you like to know more about your SBA loan problem?

Why Hire Us to Help You with Your Treasury or SBA Debt Problems?

$375,000 SBA 504 LOAN - SBA OIC CASH SETTLEMENT

$975,000 SBA 7A LOAN - SBA OIC CASH SETTLEMENT

$150,000 SBA 7A LOAN – NEGOTIATED WORKOUT AGREEMENT

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