How Protect Law Group Can Help Your Small Business Achieve Loan Forgiveness
Learn how Protect Law Group's SBA Attorneys in San Diego, Orange, and Los Angeles Counties can assist your small business in achieving loan forgiveness. Contact us!
Contact Our SBA Attorneys for Nationwide Representation of SBA and Treasury Debt Problems
Book a Consultation CallCross-Servicing is a consolidated government-wide program operated by Treasury's Bureau of Fiscal Service (BFS) that fulfills the requirement of The Debt Collection Improvement Act of 1996 (DCIA) to collect delinquent, non-tax debt on behalf of federal agencies. As required by the DCIA, an agency must refer any eligible debt more than 180 days delinquent to Fiscal Service for cross-servicing.
As part of the Cross-Servicing program, BFS must take appropriate action to service, collect, compromise, or suspend or terminate collection action on the debt. BFS encourages federal creditor agencies (agencies to whom debt is owed) to transfer all eligible delinquent debts for debt collection services before they are delinquent 180 days. Agencies are strongly encouraged to use all available debt collection tools.
The DATA Act changed the notice requirement for federal agencies to notify the Treasury Secretary of past due, nontax debts for the purposes of administrative offset from 180 days to 120 days.
In order to transfer a federal agency debt (such as a defaulted SBA loan) to BFS, the parties must execute and comply with the applicable Annual Debt Certification Agreement between the federal agencies.
The Cross-Servicing Dispute presents an avenue to release your debt from the clutches of the Treasury Department’s blackhole and back to the SBA or originating federal agency. In most cases, it is necessary to return the debt to the SBA or other originating federal agency given the Treasury’s extreme reluctance to compromise debts referred to it.
The Cross-Servicing Dispute must present facts, evidence and legal arguments establishing that your debt should have never been transferred to the Treasury. If successful, this strategy accomplishes two (2) goals: 1. It can eliminate the 28% to 30% “collection fee” that Treasury adds to your debt; and 2. It can transfer the debt back to the SBA or other originating agency, which potentially means a more realistic offer in compromise.
In order for the SBA or other federal agency to transfer your debt to the Department of Treasury, an employee of the SBA must certify, in writing, that the debt being transferred is valid, legally enforceable, and that there are no legal bars to collection. Creditor agencies, such as the SBA, must also certify that they have complied with all prerequisites to a particular collection action under the laws, regulations or policies applicable to the agency unless the creditor agency has requested, and the Department of Treasury has agreed, to do so on the creditor agency's behalf.
Thus, it is important to obtain a copy of the applicable Annual Debt Certification Agreement, as the provisions contained in this Agreement, often form the basis upon which to file or submit a formal petition for a Cross-Servicing Dispute. Generally, you would want to investigate whether you can challenge the cross-servicing of the debt from the federal creditor agency to the Treasury Department’s BFS. Some of these challenges could be based on arguments and evidence that the debt is not valid or legally enforceable, that your due process rights were violated and/or that the administrative fees, interest and/or penalties are inequitable.
You can view a Cross-Servicing Dispute Form by clicking: CSD Form
The Cross-Servicing Dispute is not as simple as asking Treasury to return the debt. We do not recommend that you simply try disputing your debt by yourself. Instead, it would be better if you hire us to investigate the grounds for a possible cross-servicing dispute, and where applicable, formally prepare a Petition for Cross-Servicing Dispute on your behalf and process your case through the federal agency’s administrative appeals channels. You need an experienced attorney to gather and analyze documents, evidence and apply legal arguments. Our aggressive attorneys know what evidence and facts to look for and how to apply legal theories to support your Cross-Servicing Dispute.
Contact us today for a Case Evaluation.
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.
Clients obtained an SBA 7(a) loan for their small business in the amount of $298,000. They pledged their primary residence and personal guarantees as direct collateral for the loan. The business failed, the lender was paid the 7(a) guaranty money and the debt was assigned to the SBA. Clients received the Official 60-Day Notice giving them a couple of options to resolve the debt balance directly with the SBA before referral to Treasury's Bureau of Fiscal Service. The risk of referral to Treasury would add nearly $95,000 to the SBA principal loan balance. With the default interest rate at 7.5%, the amount of money to pay toward interest was projected at $198,600. Clients hired the Firm with only 4 days left to respond to the 60-Day due process notice. Because the clients were not eligible for an Offer in Compromise (OIC) due to the significant equity in their home and the SBA lien encumbering it, the Firm Attorneys proposed a Structured Workout to resolve the SBA debt. After back and forth negotiations, the SBA Loan Specialist assigned to the case approved the Workout terms which prevented potential foreclosure of their home, but also saved the clients approximately $294,000 over the agreed-upon Workout term with a waiver of all contractual and statutory administrative fees, collection costs, penalties, and interest.
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.
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