If you Owe more than $30,000 contact us for a case evaluation at (833) 428-0937
contact us for a free case evaluation at (833) 428-0937
Call us (833) 428-0937

SBA and Federal Debt Articles

We Provide Nationwide Representation of Small Business Owners, Personal Guarantors, and Federal Debtors with More Than $30,000 in Debt before the SBA and Treasury Department's Bureau of Fiscal Service

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SBA Articles

Contact Us to Help You With Your SBA Debt

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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

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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

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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.

$324,000 SBA 7A LOAN - SBA OHA LITIGATION

$324,000 SBA 7A LOAN - SBA OHA LITIGATION

Clients obtained an SBA 7(a) loan for $324,000 to buy a small business and its facility. The business and real estate had an appraisal value of $318,000 at the time of purchase.  The business ultimately failed but the participating lender abandoned the business equipment and real estate collateral even though it had valid security liens. As a result, the lender recouped nearly nothing from the pledged collateral, leaving the business owners liable for the deficiency balance. The SBA paid the lender the 7(a) guaranty money and was assigned ownership of the debt, including the right to collect. However, the clients never received the SBA Official 60-Day Notice and were denied the opportunity to negotiate an Offer in Compromise (OIC) or a Workout directly with the SBA before being transferred to Treasury's Bureau of Fiscal Service, which added an additional $80,000 in collection fees. Treasury garnished and offset the clients' wages, federal salary and social security benefits. When the clients tried to negotiate with Treasury by themselves, they were offered an unaffordable repayment plan which would have caused severe financial hardship. Clients subsequently hired the Firm to litigate an Appeals Petition before the SBA Office & Hearings Appeals (OHA) challenging the legal enforceability and amount of the debt. The Firm successfully negotiated a term OIC that was approved by the SBA Office of General Counsel, saving the clients approximately $205,000.

$350,000 SBA 7A LOAN - NEGOTIATED STRUCTURED WORKOUT AGREEMENT

$350,000 SBA 7A LOAN - NEGOTIATED STRUCTURED WORKOUT AGREEMENT

Client personally guaranteed SBA 7(a) loan for $350,000. The small business failed but because of the personal guarantee liability, the client continued to pay the monthly principal & interest out-of-pocket draining his savings. The client hired a local attorney but quickly realized that he was not familiar with SBA-backed loans or their standard operating procedures. Our firm was subsequently hired after the client received the SBA's official 60-day notice. After back-and-forth negotiations, we were able to convince the SBA to reinstate the loan, retract the acceleration of the outstanding balance, modify the original terms, and approve a structured workout reducing the interest rate from 7.75% to 0% and extending the maturity date for a longer period to make the monthly payments affordable. In conclusion, not only we were able to help the client avoid litigation and bankruptcy, but our SBA lawyers also saved him approximately $227,945 over the term of the workout.

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

$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.

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SBA FAQS
What Factors Does The SBA Consider In Assessing An Obligor's "Ability to Pay?"
What Factors Does The SBA Consider In Assessing An Obligor's "Ability to Pay?"

The following is a general list of categories that the SBA refers to in assessing the obligor’s ability to pay:a. Forced sale equivalent (liquidation value).(1) The basis for this value is normally the amount recoverable from the sale of the assets within a limited period of time (auction type sale). Also to be considered, is the time and expense needed for the SBA to gain control of the asset. But generally speaking, the SBA considers the following assets: Real Property (Commercial), (Residential), (Unimproved Land); Business Assets: (Machinery/Equipment), (Accounts Receivable/Inventory), (Furniture/Fixtures), (Leasehold Improvements).(2) The Claims Collection Act and the GAO standard provide that consideration be given to the time and monies involved with enforced collection to establish a discounted forced sales figure. The forced sale equivalent value needs to be adjusted for the following types of expenses: Court costs, filing fees; (a) Prior liens, taxes, assessments; (b) Costs of sale (auctioneer’s fees, advertising, lotting, and clean up costs); (c) Time of SBA employees (financial, legal, clerical, and administrative); (d) U.S. Attorney costs (professional, administrative, out of pocket); (e) Possibility of protested litigation or of bankruptcy and related expenses; (f) Time mandated by State redemption periods and the cost (depreciation, vandalism, insurance risks) that may result from such delays; (g) Care and protection expenses pending resale; (h) Extraordinary expenses of eviction, repairs to property, vandalism; (i) Costs necessary to bring property to marketable condition; (j) Transportation/travel costs; and (k) Discount reflecting the present value of future net recovery.b. Non-reachable assets and income.There may be items which are utilizable to the obligor(s) and have substantial value but are beyond the reach of the Government. The facts of the situation should enter into the Agency’s assessment of the obligor’s good faith.c. Jointly owned property.Special problems are encountered when the obligor shares ownership with another of an asset. This, by itself, is not sufficient reason to disregard the asset as having no value. The situation must be closely examined to determine (even to the extent of hiring appraisers and consultants) if the potential value of the property warrants further action.d. Individual asset valuations.Each worthwhile asset owned by the obligor needs to be assessed. Estimating the values of these assets is not an exact science but the SBA utilizes a uniformity of approach.(1) Cash.The SBA will only be concerned with cash in amounts substantially in excess of basic living expenses as determined from the SBA 770. Special accounts (IRA’s, Keoghs, trust accounts) should be valued net of early withdrawal penalties and other costs.(2) Cash surrender value (CSV) of life insurance.The SBA will determine the net amount receivable under the terms of the policy. Loans outstanding and other costs may also have to be subtracted out. The policy must often be surrendered in order to receive the CSV. The loan value should be used for analysis if surrendering the policy would leave the family with inadequate protection. This approach is to be used even if the Agency is acknowledged as assignee in the insurance company’s home office.(3) Accounts/notes receivable.The size, age, and collectibility of these assets will be examined to determine their worth. Typically they have little forced sale value. Ordinarily, the SBA will consider only large receivables with such attention.(4) Furniture, fixtures, and other personal effects.The SBA’s policy regarding this class of assets is that they are normally not worth very much. Efforts spent in other areas will yield much better results. The SBA will assign a nominal value to the contents of a modest home for compromise situations. If such assets are subject to an SBA lien, the lien may be realized for nominal value or the assets may be abandoned if no such release is possible.(5) Jewelry, paintings, antiques, and collections.When items in these categories have been assigned substantial value, the SBA will give them special attention. Outside sources may have to be utilized to determine meaningful values on these specialty items.(6) Automobiles.Automobiles generally have a ready market and various published books give a handy reference as to value. Gross compromise value “rule of thumb” is 80 percent of loan value. Of course prior encumbrances must be deducted to determine the net compromise value.(7) Securities.The SBA generally views the value of stocks and bonds in publicly traded firms as easily ascertainable and can quickly be converted to cash. Ownership interest in firms with closely held corporate stock and in unincorporated firms present much greater valuation problems. Each situation is considered using the best judgment available. If substantial potential worth is apparent, the SBA will obtain a valuation analysis by a chartered financial analyst or some other qualified person.(8) Other assets.Common carrier rights, copyrights, liquor licenses, patents, inheritances, and trusts are the types of assets that can be worthless or have substantial value. The SBA will confer with counsel regarding local laws and their effect on these assets. The establishment of values for these assets must rely on a reasonable assessment of the circumstances in each case.(9) Real estate.This is often the asset having the largest value on an SBA obligor’s or debtor’s balance sheet. For income producing or commercial properties, the SBA will use a member of a nationally recognized appraisal organization to conduct valuation analysis.(a) For the average residence, the SBA will consider some of the following acceptable alternatives:i. A “Property Report” by a recognized reporting service;ii. A written evaluation from a local realtor (with Multiple Listing Service (MLS) comparables);iii. A report from a residential appraiser used by Farmers Home Administration (FHA), Veterans Administration (VA), or other established mortgage lender; oriv. Any other local source you may have of similar reliability.(b) These reports usually furnish the market value of the property. However, this is not sufficient for SBA valuation purposes. The following must also be weighed:i. State redemption periods, homestead exemptions, and the like.These can substantially delay or negate the SBA’s ability to get the property: SBA will have to consult with counsel if there are any questions on the impact of this type of legislation. The value analysis must consider the recovery impact of local laws.ii. Policy regarding primary residence.Both the Department of Justice (DoJ) and SBA have strong positions regarding foreclosing on homes. For the SBA, a foreclosure action is generally considered as a very last resort. Concerted settlement efforts are generally first attempted, and fully documented in the loan file. Similarly, the DoJ will not, as a matter of policy, proceed with a foreclosure action if a reasonable settlement is at all possible or if the result will cause a cooperative debtor a severe hardship. This policy is consistent with the Claims Collection Act which says that a compromise settlement must be attempted before steps are taken to deprive obligors of their residences.

How long does the process take?
How long does the process take?

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.

What Happens If A Borrower Or Guarantor Refuses To Cooperate?
What Happens If A Borrower Or Guarantor Refuses To Cooperate?

If a Borrower or Obligor does not respond to the opportunity to submit an Offer in Compromise, they may be referred to the U.S. Department of Treasury for various enforced collection activities.

How Can the SBA Go After My Personal Assets When My Business Is the Party To The Loan Agreement?
How Can the SBA Go After My Personal Assets When My Business Is the Party To The Loan Agreement?

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.

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

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