SBA Debt Collection
SBA debt collection litigation includes judicial and nonjudicial foreclosures, bankruptcy and lawsuits to collect on the 504 Note or Guarantees.
Small business owners who mismanage their finances could default on their Small Business Administration loan. To default, they must become delinquent for ninety days. At this point, their lender could exceed standard collection practices. These actions could include seizure of business assets such as bank accounts and real properties. A SBA Offer in Compromise could give the business owner an opportunity for settling the debt without serious repercussions.
After the SBA loan default, the lender notifies the borrower of probable action if they don't contact the lender and make arrangements for payment. The borrower has a deadline for these measures and should contact their attorney quickly. Once they have the SBA demand letter, their attorney could negotiate a settlement. Since the seizure process could increase the lender's costs, they are more likely to accept an appropriate offer.
Once the delinquency reaches ninety days, the loan enters default. At this stage, the lender is within their rights to acquire assets and the collateral used to secure the loan. They conduct the seizure process to acquire a balance that reflects what is owed by the borrower. Since the SBA is a government agency, they have federal rights and take action accordingly.
Any property listed on the loan documentation as collateral is seized immediately. This includes automobiles, real property, and business accounts. If this value doesn't reflect the balance owed, the agency could acquire more property and assets. Through a SBA loan foreclosure, they could acquire the borrower's primary residence if it was purchased with company funds.
A tax offset is a settlement in which the consumer could use their tax refunds to pay the balance. The lender seizes their tax refunds each year until the balance is paid off. If the borrower is behind on their tax payments, their attorney could acquire a settlement for the outstanding balance. A Tax Offset Program could help these consumers.
Small business owners should follow strategies for avoiding the effects of a SBA default. These actions could equate to total seizure of the business assets and properties. Business owners who wish to avoid these circumstances should contact an attorney now.
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.
Client's small business obtained an SBA COVID EIDL for $301,000 pledging collateral by executing the Note, Unconditional Guarantee and Security Agreement. The business defaulted on the loan and the SBA CESC called the Note and Guarantee, accelerated the principal balance due, accrued interest and retracted the 30-year term schedule.
The loan was transferred to the Treasury's Bureau of Fiscal Service which resulted in the statutory addition of $90,000+ in administrative fees, costs, penalties and interest with the total debt now at $391.000+. Treasury also initiated a Treasury Offset Program (TOP) levy against the client's federal contractor payments for the full amount each month - intercepting all of its revenue and pushing the business to the brink of bankruptcy.
The Firm was hired to investigate and find an alternate solution to the bankruptcy option. After submitting formal production requests for all government records, it was discovered that the SBA failed to send the required Official 60-Day Pre-Referral Notice to the borrower and guarantor prior to referring the debt to Treasury. This procedural due process violation served as the basis to submit a Cross-Servicing Dispute to recall the debt from Treasury back to the SBA and to negotiate a reinstatement of the original 30-year maturity date, a modified workout, cessation of the TOP levy against the federal contractor payments and removal of the $90,000+ Treasury-based collection fees, interest and penalties.
Small business sole proprietor obtained an SBA COVID-EIDL loan for $500,000. Client defaulted causing SBA to charge-off the loan, accelerate the balance and refer the debt to Treasury's Bureau of Fiscal Service for aggressive collection. Treasury added $180,000 in collection fees totaling $680,000+. Client tried to negotiate with Treasury but was only offered a 3-year or 10-year repayment plan. Client hired the Firm to represent before the SBA, Treasury and a Private Collection Agency. After securing government records through discovery and reviewing them, we filed an Appeals Petition with the SBA Office of Hearings & Appeals (OHA) court challenging the SBA's referral of the debt to Treasury citing a host of purported violations. The Firm was able to negotiate a reinstatement and recall of the loan back to the SBA, participation in the Hardship Accommodation Plan, termination of Treasury's enforced collection and removal of the statutory collection fees.
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.
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