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Book a Consultation CallThe Treasury Offset Program is a centralized offset program, administered by the Treasury Department’s Bureau of the Fiscal Service (BFS), to collect delinquent federal agency debts (including SBA debts), in accordance with 26 U.S.C. § 6402(d) (collection of debts owed to federal agencies), 31 U.S.C. § 3720A (reduction of tax refund by amount of the debts), and other applicable laws.
Payment agencies prepare and certify payment vouchers to BFS and disbursing officials at other federal agencies that are non-Treasury disbursed (such as the Department of Defense), who then disburse payments. The payment vouchers contain information about the payment including the Tax Identification Number (TIN) and name of the recipient.
Before an eligible federal payment is disbursed to a payee, disbursing officials compare the payment information with debtor information, which has been supplied by the federal creditor agency, in BFS’s delinquent debtor database. If the payee's TIN and name match the TIN and name of a debtor, the disbursing official offsets (withholds) the payment, in whole or in part, to satisfy the debt, to the extent legally allowed.
BFS transmits amounts collected through offset to the appropriate federal creditor agencies. BFS maintains information about the delinquent debt in the TOP delinquent debtor database and continues to offset eligible federal payments until the federal creditor agency suspends or terminates debt collection or offset activity for the debt.
A federal creditor agency will suspend collection if the debt is subject to a bankruptcy stay or if other reasons justify suspension. A federal creditor agency will terminate collection of a debt if it is paid in full, compromised, discharged, or if other reasons justify termination.
The federal government's administrative debt collection activities are governed by a number of federal laws. BFS, as the central disbursing agency of the federal government is required to perform such offset pursuant to 31 U.S.C. § 3716(c).
There are, however, several federal rules and regulations that BFS must adhere to prior to utilizing its TOP levy powers. These rules and regulations my be viewed by clicking: Summary of TOP's Program Rules and Requirements - which explains the general rules applicable to TOP, due process prerequisites, offset amounts (percent of payments that may be offset by debt type) and TOP payment exemptions.
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Clients executed several trust deeds pledging seven (7) real estate properties and unconditional personal guarantees for an SBA 7(a) loan from the participating lender. The clients' small business failed and eventually defaulted on repayment of the loan exposing all collateral pledged by the clients. The SBA subsequently acquired the loan balance from the lender, including the right to liquidate and collect all pledged collateral pursuant to the trust deed instruments.
The Firm was hired to negotiate separate release of lien proposals for all 7 real estate properties. In preparation for the work assignment, the Firm Attorneys initiated discovery to secure records from the SBA and Treasury's Bureau of Fiscal Service. After reviewing the records and understanding the interplay between the lender and the SBA, the attorneys then prepared, submitted and negotiated the release of lien (ROL) for each of the 7 real estate properties for consideration.
After submitting the proposals, the assigned SBA Loan Specialists approved each ROL package - significantly reducing the total SBA debt claimed.
The client personally guaranteed an SBA 7(a) loan for $150,000. His business revenue decreased significantly causing default and an accelerated balance of $143,000. The client received the SBA's Official 60-day notice with the debt scheduled for referral to the Treasury’s Bureau of Fiscal Service for aggressive collection in less than 26 days. We were hired to represent him, respond to the SBA's Official 60-day notice, and prevent enforced collection by the Treasury and the Department of Justice. We successfully negotiated a structured workout with an extended maturity date that included a reduction of the 14% interest rate and removal of substantial collection fees (30% of the loan balance), effectively saving the client over $242,000.
Small business and guarantors obtained an SBA COVID-EIDL loan for $1,000,000. Clients defaulted causing SBA to charge-off the loan, accelerate the balance and refer the debt to Treasury's Bureau of Fiscal Service for collection. Treasury added nearly $500,000 in collection fees totaling $1,500,000. Clients were served with the SBA's Official 60-Day Notice and exercised the Repayment option by applying for the SBA’s Hardship Accommodation Plan. However, their application was summarily rejected by the SBA without providing any meaningful reasons. Clients hired the Firm to represent them against the SBA, Treasury and a Private Collection Agency. After securing government records through discovery, we filed an Appeals Petition with the SBA Office of Hearings & Appeals (OHA) court challenging the SBA's referral of the debt to Treasury. During litigation and before the OHA court issued a final Decision and Order, the Firm successfully negotiated a reinstatement and recall of the loan back to the SBA, a modification of the original repayment terms, termination of Treasury's enforced collection and removal of the statutory collection fees.
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