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.

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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If your SBA loan is in default and you are working with your lender to wind down the business and settle the deficiency with an offer in compromise, time is of the essence. Banks generally do not wait much longer than 60-90 days after the defaulted borrower (business) has been liquidated or shut down to tender an OIC to the SBA for consideration which, if accepted, could potentially release the guarantors from the deficiency for a lesser amount. Generally speaking, the bank or CDC will send you what is commonly known as a Notice of Default, Acceleration and Demand for Payment for the entire loan balance due. If litigation is not a fiscally viable option and after certain collateral liquidation, you may be offered the chance to submit an SBA OIC with the bank or CDC for SBA consideration. If your case is ultimately transferred to the SBA, you should receive a 60-day Official Notice and demand for payment. If you fail to timely submit an SBA OIC within the administrative time frame as noted in this letter, the SBA will then refer your debt to the U.S. Department of Treasury for enforced collection, and thus, you will probably lose your one (1) time shot to settle for less than what is purportedly owed on the SBA debt through the SBA Offer in Compromise process..It should be noted that Treasury rarely collects on these bad loans directly – rather they hire private collection agencies (PCAs) to handle this. These PCAs don’t know anything about the history behind the loan – their job is to be ruthless in their collection endeavors as they generally receive a generous percent of the collected amount or actually bought the so-called junk federal debt for pennies on the dollar. Several of these federally approved private collection agencies or junk debt buyers are particularly nasty, and rarely settle for less than 50% of the outstanding amount as the incentives for collection, litigation and judgment pursuit are very high. Contrast that with the results that we have reviewed and settled and it’s easy to see the importance of addressing your outstanding SBA debt sooner rather than later, whether you’re working with a non-attorney consultant, an SBA Attorney or Federal Agency Practitioner, or attempting to do it yourself. If you think your banker is nasty or difficult to work with, you don’t want to experience the tactics of these collection agencies or junk debt buyers.

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.

An SBA loan is a small business loan made by a private sector lender (such as a local bank or other lender) which is guaranteed by the United States Small Business Administration (“SBA”) pursuant to the terms of the U.S. Small Business Act, as amended (“Act”).