Small businesses facing mounting debt obligation from an SBA loan may seek a small business reorganization under the new bankruptcy law.
Book a Consultation CallThe rapid deterioration of the American job market (and the world job market) will make it tough on San Diego businesses in the coming months. The new Chapter 11 Subchapter V bankruptcy may provide an easier solution for small businesses. A small business reorganization may save your business.
Employment
No matter how you slice it, the employment picture does not bode well for small businesses. With people out of work, less money will be spent in the economy and at your business. Unfortunately, this will further negatively affect employment. Even with the Payment Protection Program and various deferments, the situation does not look good for small businesses. For many small businesses, an SBA 7a or 504 loan consists of the main debt obligation. Without a small business reorganization, the lender and / or the SBA can attempt to collect.
Like many businesses, your business may be facing a downturn. The options may seem few. Lending programs, like the SBA's Disaster Loan program, may help but serve to add debt to an existing debt problem. The regular Chapter 11 bankruptcy provides protection from creditors while a business reorganizes its debts, but it remains a costly and time-consuming option. If the situation exists as too dire, your business could just shut its doors. But, as a small business owner, you may still owe on your business debts as a personal guarantor. For instance, you will remain personally liable on an SBA loan even if your business closes its doors.
The new Chapter 11 bankruptcy went into effect in February of 2020. As such, a small business whose main debt consists of an SBA loan may use the new bankruptcy to reorganize the debt. Therefore, a bankruptcy reorganization may enable your small business to quickly and efficiently restructure its SBA debt. By reorganizing the debt, your small business may reduce its monthly debt obligation to coincide with its cash flow. A reorganization bankruptcy would allow your small business to continue operating.
If your San Diego County small business needs reorganization of its SBA loan debt, talk to one of our experienced attorneys today.
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
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
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.
Client personally guaranteed an SBA 7(a) loan to help with a relative’s new business venture. After the business failed, Treasury was able to secure a recurring Treasury Offset Program (TOP) levy against his monthly Social Security Benefits based on the claim that he owed over $1.2 million dollars. We initially submitted a Cross-Servicing Dispute, but then, prepared and filed an Appeals Petition with the SBA Office of Hearings and Appeals (SBA OHA). As a result of our efforts, we were able to convince the SBA to not only terminate the claimed debt of $1.2 million dollars against our client (without him having to file bankruptcy) but also refund the past recurring amounts that were offset from his Social Security Benefits in connection with the TOP levy.
Our firm successfully resolved an SBA COVID-19 Economic Injury Disaster Loan (EIDL) default in the amount of $150,000 on behalf of Illinois-based client. After the business permanently closed due to the economic impacts of the pandemic, the owners faced potential personal liability if the business collateral was not liquidated properly under the SBA Security Agreement.
We guided the client through the SBA’s Business Closure Review process, prepared a comprehensive financial submission, and negotiated directly with the SBA to release the collateral securing the loan. The borrower satisfied their collateral obligations with a payment of $2,075, resolving the SBA’s security interest.
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.
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