SBA Debt Attorneys

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.

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.

The SBA can compromise a debt (that is, it can accept less than the full amount owed on a debt) based on the authority contained in the following statutes and regulatory sources:a. Section 5(b) of the Small Business Act which gives the Administrator authority to effect compromise settlements.b. The Federal Claims Collection Act (31 U.S.C. 3701 and following) which provides a means for the settlement, adjustment, and compromise of claims by Federal agencies.c. 4 CFR § 183, which prescribes standards for the compromise of claims under the Federal Claims Collection Act.

SOP 50 51 2A, Ch. 17, 8-12 states that “[a]ny settlement amount must bear a reasonable relationship to the present value of the estimated amount of recovery available through foreclosure (using a forced sale equivalent value) and enforced collection. This value, combined with the earning potential of the debtor, will form the basis for the offer in compromise.“ Litigative risks” involve answering  certain legal questions as to the actual liability of the debtor and will be thoroughly explored by the SBA, if raised properly. The degree of doubt coupled with the potential costs, expenses and time involved in pursuing collection matters will generally determine the acceptable amount for a settlement. Thus, when considering an SBA OIC, it is very important for your qualified representative (who should have a background in litigation and thus be an attorney and have a working knowledge of SBA matters) to be able to advise SBA debtors regarding litigative risks and the costs associated with litigation and how all of these factors can impact the proposed offer to the Federal Government.

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.