SBA Default and Offer In Compromise.
SBA Default and Offer in Compromise - the OIC process may allow you to settle your loan for pennies on the dollar.
When faced with overwhelming debt and struggling to meet loan obligations, entrepreneurs often find themselves seeking alternatives to manage their financial burdens. One potential solution that may provide relief is an SBA (Small Business
Book a Consultation CallIn the world of small business, financial challenges can arise unexpectedly. When faced with overwhelming debt and struggling to meet loan obligations, entrepreneurs often find themselves seeking alternatives to manage their financial burdens. One potential solution that may provide relief is an SBA (Small Business Administration) Offer in Compromise. This article delves into the intricacies of this option and explores whether it is the right path for you.
When considering the possibility of an SBA Offer in Compromise, it's crucial to evaluate the benefits and drawbacks it entails. This section examines the various aspects of this option to help you determine if it aligns with your business needs and financial situation.
The SBA Offer in Compromise is a program designed to assist small business owners burdened by substantial debt. It offers a potential resolution by allowing eligible personal guarantors to settle their debts for less than the total amount owed. By negotiating with the SBA, entrepreneurs can reduce their financial obligations and regain control of their finances.
Not all personal guarantors qualify for an SBA Offer in Compromise. Meeting the eligibility requirements is essential to determine if this alternative is suitable for your specific circumstances. The following criteria must generally be met:
1. Demonstrating financial hardship: To be considered for an SBA Offer in Compromise, you must prove that paying off the debt in full would cause significant financial hardship.
2. Inability to repay the loan: You need to demonstrate that you lack the financial capacity to fulfill its loan obligations due to ongoing financial challenges.
3. Good faith effort: The SBA expects you to make a genuine effort to repay the debt before considering an offer in compromise. This can involve exploring other repayment options, such as loan modifications or debt restructuring. That is, did you help maximize recovery on the loan?
1. Debt reduction: The primary benefit of an SBA Offer in Compromise is the opportunity to reduce your overall debt burden. By negotiating with the SBA, you may be able to settle your debts for an amount significantly lower than what you owe.
2. Financial relief: If you are struggling financially and unable to meet loan payments, an SBA Offer in Compromise can provide much-needed relief. It allows you to regain control of your finances and focus on reviving your business.
3. Avoiding bankruptcy: For many entrepreneurs, the thought of filing for bankruptcy is distressing. An SBA Offer in Compromise provides an alternative to bankruptcy, allowing you to resolve your debt issues while avoiding the severe consequences associated with bankruptcy proceedings.
1. Impact on credit score: While an SBA Offer in Compromise can alleviate financial burdens, it may have a negative impact on your credit score. It is crucial to consider the long-term implications and potential challenges of obtaining credit in the future.
2. Eligibility criteria and approval process: The eligibility requirements for an SBA Offer in Compromise can be stringent, and the approval process may be complex and time-consuming. It is essential to prepare a strong case and meet all the necessary documentation requirements.
Yes, negotiation is a fundamental aspect of the SBA Offer in Compromise. The program allows you to present your case and propose an offer to settle your debts. However, it is essential to understand that the SBA has the final say in approving or rejecting the offer.
While an SBA Offer in Compromise can significantly reduce your debt, it does not guarantee complete elimination. The SBA will assess your financial situation and make a determination based on your ability to repay as well as other factors.
Typically, if you have already filed for bankruptcy, you may not be eligible for an SBA Offer in Compromise if the debt was already discharged. It is crucial to consult with legal and financial experts to explore the options available to you based on your specific circumstances.
The timeline for the SBA Offer in Compromise process can vary depending on several factors, such as the complexity of your case and the backlog of applications. It is advisable to consult with an SBA expert to get a better understanding of the expected timeline.
If your SBA Offer in Compromise is rejected, you have the option to file a motion for reconsideration. It is crucial to thoroughly review the reasons for rejection and work with professionals to strengthen your case during the appeal process.
If your SBA Offer in Compromise is approved, you will be required to fulfill the agreed-upon terms, which may involve making a lump sum payment or adhering to a structured repayment plan. Once you have satisfied these obligations, your debts will be considered resolved.
Navigating the challenges of financial distress as a small business owner can be overwhelming. Exploring alternatives like the SBA Offer in Compromise can provide a viable path towards regaining financial stability. By understanding the eligibility criteria, benefits, and drawbacks associated with this option, you can make an informed decision that aligns with your business's needs and goals.
Please contact us to set up a case evaluation and consultation.
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.
Small business sole proprietor obtained an SBA COVID-EIDL loan for $500,000. Client defaulted causing SBA to charge-off the loan, accelerate the balance and refer the debt to Treasury's Bureau of Fiscal Service for aggressive collection. Treasury added $180,000 in collection fees totaling $680,000+. Client tried to negotiate with Treasury but was only offered a 3-year or 10-year repayment plan. Client hired the Firm to represent before the SBA, Treasury and a Private Collection Agency. After securing government records through discovery and reviewing them, we filed an Appeals Petition with the SBA Office of Hearings & Appeals (OHA) court challenging the SBA's referral of the debt to Treasury citing a host of purported violations. The Firm was able to negotiate a reinstatement and recall of the loan back to the SBA, participation in the Hardship Accommodation Plan, termination of Treasury's enforced collection and removal of the statutory collection fees.
Client’s small business obtained an SBA 7(a) loan for $150,000. He and his wife signed personal guarantees and pledged their home as collateral. The SBA loan went into default, the term or maturity date was accelerated and demand for payment of the entire amount claimed was made. The SBA lender’s note gave it the right to adjust the default interest rate from 7.25% to 18% per annum. The business filed for Chapter 11 bankruptcy but was dismissed after 3 years due to its inability to continue with payments under the plan. Clients wanted to file for Chapter 7 bankruptcy, which would have been a mistake as their home had significant equity to repay the SBA loan balance in full as the Trustee would likely seize and sell the home to repay the secured and unsecured creditors. However, the SBA lender opted to pursue the SBA 7(a) Guaranty and subsequently assigned the loan and the right to enforce collection to the SBA. Clients then received the SBA Official 60-Day Notice and hired the Firm to respond to it and negotiate on their behalf. Clients disputed the SBA’s alleged balance of $148,000, as several payments made to the SBA lender during the Chapter 11 reorganization were not accounted for. To challenge the SBA’s claimed debt balance, the Firm Attorneys initiated expedited discovery to obtain government records. SBA records disclosed the true amount owed was about $97,000. Moreover, because the Clients’ home had significant equity, they were not eligible for an Offer in Compromise or an immediate Release of Lien for Consideration, despite being incorrectly advised by non-attorney consulting companies that they were. Instead, our Firm Attorneys recommended a Workout of $97,000 spread over a lengthy term and a waiver of the applicable interest rate making the monthly payment affordable. After back and forth negotiations, SBA approved the Workout proposal, thereby saving the home from imminent foreclosure and reducing the Clients' liability by nearly $81,000 in incorrect principal balance, accrued interest, and statutory collection fees.
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.
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