SBA Workouts: Option To SBA OIC To Settle SBA Debt
Dealing with an SBA OIC case can be hard. This is why you should allow our lawyers to settle SBA debt for you. Contact us about your SBA loan default.
Learn about different bankruptcy options for small business owners. Contact Protect Law Group serving San Diego, Orange, and Los Angeles Counties.
Book a Consultation CallFor small business owners facing overwhelming debt burdens, bankruptcy can be a viable option for gaining financial relief and a fresh start. However, when it comes to dealing with Small Business Administration (SBA) debt, understanding the bankruptcy options available is crucial. In this blog post, Protect Law Group will explore the various bankruptcy options specifically tailored for small business owners with SBA debts.
Chapter 7 bankruptcy, also known as liquidation bankruptcy, is a common option for small business owners looking to eliminate their SBA debts. Through this process, the business's assets are liquidated, and the proceeds will be used to pay off creditors, including the SBA. Once the debts are discharged, the business owner can start anew without the burden of SBA obligations.
For small business owners who wish to continue operating their businesses while seeking debt relief, Chapter 11 bankruptcy may be the right option. This type of bankruptcy allows for the restructuring of debts, including SBA loans, by developing a repayment plan that is manageable for the business. The plan typically extends the repayment period and may involve negotiating reduced interest rates or lower monthly payments.
In some cases, small business owners may be able to negotiate loan workouts or settlements directly with the SBA. This involves discussing revised repayment terms or exploring the possibility of settling the debt for a reduced amount. Working with an experienced bankruptcy attorney during these negotiations can greatly increase the chances of securing favorable terms.
The SBA offers an option called an Offer in Compromise (OIC), which allows small business owners to settle their SBA debts for less than the amount owed. This option is typically available if the business demonstrates an inability to repay the debt in full and can provide supporting financial documentation. While an OIC can be a viable solution, it's important to note that the decision lies with the SBA.
For small business owners struggling with SBA debts, exploring bankruptcy options can provide a path to financial recovery. Book a consultation call with one of Protect Law Group’s SBA loan attorneys serving San Diego, Orange, and Los Angeles Counties 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.
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.
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.
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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