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Will the SBA Accept My Offer in Compromise?

Explore the factors influencing SBA's decision on your Offer in Compromise. Learn how to improve your chances of acceptance and manage your defaulted loan effectively.

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Have You Wondered If the SBA Will Accept Your Offer in Compromise?

If you're dealing with a defaulted SBA loan and exploring your options, you might be considering an Offer in Compromise (OIC). This process allows you to propose settling your debt for less than the full amount owed. However, whether the SBA accepts your offer depends on several factors. Protect Law Group, a law firm specializing in SBA loan issues, can guide you through this complex process and help improve your chances of success.

Understanding the SBA Offer in Compromise

An Offer in Compromise is a proposal to repay a portion of your debt instead of the full amount. This can provide relief if you're struggling financially. The SBA views OICs as a way to recover some funds while offering borrowers a chance to resolve their debts.

Why Consider an Offer in Compromise?

Business ventures can fail for various reasons, leaving debt behind. While bankruptcy is an option, it often carries long-term consequences. An OIC offers an alternative that may help you manage your debt without the stigma of bankruptcy. Protect Law Group can help you evaluate whether this is the right path for you.

Factors the SBA Considers

The SBA evaluates several factors when deciding whether to accept an OIC. These include:

  • The Handler of Your File: Different SBA offices and individuals may approach cases differently.
  • Your Cooperation with the Lender: Demonstrating good faith and proactive communication can work in your favor.
  • Presence of Liquid Assets: If you have assets that could be collected traditionally, the SBA may be less inclined to accept your offer.
  • Amount of Deficiency Balance: Larger balances often face stricter scrutiny.
  • Potential for Bankruptcy: The SBA considers whether bankruptcy could shield your assets.
  • Guarantor’s Net Worth and Assets: Your financial standing, including retirement assets, is evaluated.
  • Wage Garnishment Yield: The SBA assesses potential recovery through wage garnishment.
  • Guarantor's Health and Special Circumstances: Health issues or personal hardships may lead to leniency.
  • Cost of Collection: The SBA weighs the cost of pursuing collection against the potential recovery.

The Goal of the SBA

The SBA aims to achieve a resolution that is more financially advantageous than enforced collection actions. Lump sum payments are often preferred as they provide immediate returns with less risk and cost.

Preparing Your Offer in Compromise

To increase the likelihood of acceptance, consider the following steps:

Evaluating Your Financial Situation

Conduct a thorough review of your finances, including income, expenses, assets, and liabilities. Protect Law Group can assist in organizing this information to strengthen your proposal.

Setting a Realistic Offer

Your offer should reflect your genuine ability to pay. Unrealistic proposals can harm your credibility. Protect Law Group can help you strike the right balance.

Consulting with Experts

Professional advice is invaluable. Protect Law Group’s experienced SBA attorneys can guide you through the process, ensuring your documentation and negotiation strategies are effective.

Documenting Your Circumstances

Provide detailed explanations for your financial struggles, supported by documentation. This strengthens your case and demonstrates sincerity.

Submitting Your Offer

Submitting an OIC requires precision and thoroughness. Protect Law Group can help ensure your submission is complete and accurate.

SBA Form 1150

Most OIC submissions involve completing SBA Form 1150, which requires detailed financial information. Accuracy is crucial to avoid delays or rejections.

Correspondence with SBA

Include a cover letter summarizing your situation and key points of your OIC. This personalizes your submission and provides context beyond the numbers.

Potential Outcomes

After submission, the SBA will review your OIC. Possible outcomes include:

Acceptance of Your Offer

If accepted, you can move forward without the burden of overwhelming debt. Protect Law Group can help you adhere to the terms of the agreement.

Counteroffer from SBA

The SBA may propose a counteroffer. Being prepared to negotiate is essential.

Rejection of Your Offer

If rejected, understanding the reasons is critical. Protect Law Group can help you reassess and potentially resubmit a revised offer.

Moving Forward After a Decision

If Accepted

Adhere strictly to the terms of the agreement to avoid defaulting on the new arrangement.

If Rejected

Rejection doesn’t mean the end. Protect Law Group can help you explore other options, including negotiation or, if necessary, bankruptcy.

Conclusion

Whether the SBA accepts your OIC depends on many factors. Protect Law Group’s expertise in SBA loan issues can help you navigate this complex process, increasing your chances of a favorable outcome. Contact them at (833) 428-0937 for a case evaluation and personalized guidance toward financial recovery.

Will the SBA Accept My Offer in Compromise?

Are you struggling with a defaulted SBA loan and wondering if the SBA will accept your Offer in Compromise? The process can be complex, but with the right guidance, you can increase your chances of success. Protect Law Group specializes in helping individuals and businesses navigate SBA loan challenges, including Offers in Compromise. Their experienced SBA attorneys and Federal Agency Practitioners provide tailored solutions to help you resolve your debt effectively. Contact Protect Law Group today at (833) 428-0937 for a case evaluation and take the first step toward financial relief.

Frequently Asked Questions

What is an SBA Offer in Compromise (OIC)?

An SBA Offer in Compromise (OIC) is a proposal to settle your SBA loan debt for less than the full amount owed. It is designed for borrowers facing financial hardship who are unable to meet their loan obligations fully. The SBA considers OICs as a way to recover some funds while providing relief to borrowers.

Why should I consider an Offer in Compromise instead of bankruptcy?

An Offer in Compromise can be a viable alternative to bankruptcy, which often carries long-term repercussions and stigma. By pursuing an OIC, you may be able to manage your debt more effectively and avoid the negative consequences associated with filing for bankruptcy.

What factors does the SBA consider when evaluating an Offer in Compromise?

The SBA evaluates several factors, including the handler of your file, your cooperation with the lender, the presence of liquid assets, the amount of deficiency balance, the potential for bankruptcy, your net worth and assets, wage garnishment yield, special circumstances like health issues, and the cost of collection. These factors help determine whether your offer is acceptable.

How can I increase the chances of my Offer in Compromise being accepted?

To increase your chances, evaluate your financial situation thoroughly, set a realistic offer based on your ability to pay, consult with experts like attorneys or financial advisors, and provide detailed documentation explaining your financial struggles. Submitting accurate and complete forms, such as SBA Form 1150, is also crucial.

What happens if my Offer in Compromise is rejected?

If your OIC is rejected, it is important to understand the reasons behind the decision. You can reassess your financial situation, address any deficiencies in your submission, and potentially resubmit a revised offer. Consulting a professional may also help you explore other options, such as negotiation or bankruptcy as a last resort.

What are the potential outcomes after submitting an Offer in Compromise?

The SBA may accept your offer, providing relief and closure to your debt situation. Alternatively, they might propose a counteroffer with adjusted terms or amounts. If your offer is rejected, you can use the feedback to revise and resubmit your proposal or explore other debt resolution options.

$310,000 SBA 7A LOAN - SBA OIC TERM WORKOUT

$310,000 SBA 7A LOAN - SBA OIC TERM WORKOUT

Client personally guaranteed an SBA 7(a) loan for $100,000 from the lender. The SBA loan went into early default in 2006 less than 12 months from disbursement. The SBA paid the 7(a) guaranty monies to the lender and subsequently acquired the deficiency balance of about $96,000, including the right to collect against the guarantor. However, the SBA sent the Official 60-Day Due Process Notice to the Client's defunct business address instead of his personal residence, which he never received. As a result, the debt was transferred to Treasury's Bureau of Fiscal Service where substantial collection fees were assessed, including accrued interest per the promissory note. Treasury eventually referred the debt to a Private Collection Agency (PCA) - Pioneer Credit Recovery, Inc. Pioneer sent a demand letter claiming a debt balance of almost $310,000 - a shocking 223% increase from the original loan amount assigned to the SBA. Client's social security disability benefits were seized through the Treasury Offset Program (TOP). Client hired the Firm to represent him as the debt continued to snowball despite seizure of his social security benefits and federal tax refunds as the involuntary payments were first applied to Treasury's collection fees, then to accrued interest with minimal allocation to the SBA principal balance.

We initially submitted a Cross-Servicing Dispute (CSD) challenging the referral of the debt to Treasury based on the defective notice sent to the defunct business address. Despite overwhelming evidence proving a violation of the Client's Due Process rights, the SBA still rejected the CSD. As a result, an Appeals Petition was filed with the SBA Office of Hearings & Appeals (OHA) Court challenging the SBA decision and its certification the debt was legally enforceable in the amount claimed. After several months of litigation before the SBA OHA Court, our Firm Attorney successfully negotiated an Offer in Compromise (OIC) Term Workout with the SBA Supervising Trial Attorney for $82,000 spread over a term of 74 months at a significantly reduced interest rate saving the Client an estimated $241,000 in Treasury collection fees, accrued interest (contract interest rate and Current Value of Funds Rate (CVFR)), and the PCA contingency fee.

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

$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.

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$488,000 SBA 7A LOAN - SBA OHA LITIGATION

$488,000 SBA 7A LOAN - SBA OHA LITIGATION

The clients are personally guaranteed an SBA 7(a) loan.  The SBA referred the debt to the Department of Treasury, which was seeking payment of $487,981 from our clients.  We initially filed a Cross-Servicing Dispute, which was denied.  As a result, we filed an Appeals Petition with the SBA Office of Hearings and Appeals asserting legal defenses and supporting evidence uncovered during the discovery and investigation phase of our services.  Ultimately, the SBA settled the debt for $25,000 - saving our clients approximately $462,981.

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