Contact Our SBA Attorneys for Nationwide Representation of SBA and Treasury Debt Problems
Book a Consultation CallIf you have recently received a letter from Treasury’s Bureau of Fiscal Service (BFS) demanding that you pay off an SBA debt or other Federal Agency Creditor non-tax debt where the Government has added an amount up to 30% of the original balance as “administrative fees and costs,” you should consider exercising your statutory rights as codified in the Debt Collection Improvement Act (DCIA) of 1996. Do not ignore this important letter. You will need to act quickly before Treasury begins to utilize their administrative collection weapons against you.
Sometimes, based on your financial status, a compromise or settlement with Treasury’s BFS won’t be a viable option. Some federal debtors have too much in liquid assets and/or their monthly income is too high such that the Treasury’s BFS will not be amenable to accepting your compromise or settlement offer.
If your financial profile and net worth disqualifies you for a compromise, one of your options is to negotiate a repayment agreement with the Treasury’s BFS. After carefully reviewing your financial situation, we can negotiate a reasonable repayment agreement with the Treasury’s BFS.
A repayment agreement with the Treasury’s BFS is used to pay the claimed debt over a reasonable period of time. However, the Treasury’s BFS unilaterally defines a “reasonable period of time” as no more than 3 years. It, however, does not take into consideration certain factors as noted in the DCIA of 1996, the supporting Code of Federal Regulations (CFR) or the Federal Claims Collection Standards (FCCS) to derive the monthly amount. Instead, it just calculates the monthly amount by dividing the unverified amount of the alleged federal non-tax debt by 36 months.
It is a one-sided negotiation that favors the Treasury’s BFS. Don’t fall into the trap by trying to negotiate the repayment agreement terms by yourself. Instead, let us analyze your financial profile and compare it against the FCCS to derive a “reasonable” amount that you can afford and present the terms to the Treasury’s BFS to arrive at a “win-win” negotiation that works for both parties.
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 personally guaranteed SBA 504 loan balance of $750,000. Clients also pledged the business’s equipment/inventory and their home as additional collateral. Clients had agreed to a voluntary sale of their home to pay down the balance. We intervened and rejected the proposed home sale. Instead, we negotiated an acceptable term repayment agreement and release of lien on the home.
Clients executed personal and corporate guarantees for an SBA 7(a) loan from a Preferred Lender Provider (PLP). The borrower corporation defaulted on the loan exposing all collateral pledged by the Clients. The SBA subsequently acquired the loan balance from the PLP, including the right to collect against all guarantors. The SBA sent the Official Pre-Referral Notice to the guarantors giving them sixty (60) days to either pay the outstanding balance in full, negotiate a Repayment (Offer in Compromise (OIC) or Structured Workout (SW)), challenge their alleged guarantor liability or file a Request for Hearing (Appeals Petition) with the SBA Office of Hearings & Appeals.
Because the Clients were not financially eligible for an OIC, they opted for Structured Workout negotiations directly with the SBA before the debt was transferred to the Bureau of Fiscal Service, a division of the U.S. Department of Treasury for enforced collection.
The Firm was hired to negotiate a global Workout Agreement directly with the SBA to resolve the personal and corporate guarantees. After submitting the Structured Workout proposal, the assigned SBA Loan Specialist approved the requested terms in under ten (10) days without any lengthy back and forth negotiations.
The favorable terms of the Workout included an extended maturity at an affordable principal amount, along with a significantly reduced interest rate saving the Clients approximately $181,000 in administrative fees, penalties and interest (contract interest rate and Current Value of Funds Rate (CVFR)) as authorized by 31 U.S.C. § 3717(e) had the SBA loan been transferred to BFS.
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