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Often times, SBA debtors who have signed personal guarantees associated with an SBA Loan Agreement think that simply filing for Chapter 7 Bankruptcy is the proverbial “golden ticket” to fix the SBA loan problems and get out of personal liability with an SBA loan default. However, just because an SBA debtor files for Chapter 7 Bankruptcy versus an SBA Offer in Compromise, does not mean that the debtor is “out of the woods.”
Banks and lenders try to find ways to create or maintain superior leverage even though an SBA debtor threatens to file for bankruptcy protection after an SBA loan default. However, the story does not end with a mere electronic or paper filing. Lenders and their attorneys do scrutinize the Chapter 7 petition pre-filing actions of SBA debtors to discover if distressed SBA debtors have improperly disposed of collateral, transferred property or other reachable assets through "quitclaim" or other suspicious "gift" transactions to family, friends or other third parties to keep them from their reaches.
Chapter 7 bankruptcy debtors, in their filings, are required to disclose to the United States Trustee all of their assets, liabilities, income, and any anticipated increase in income. Any intentional failure to do so, can not only expose the SBA debtors to the adversarial complaint process and disqualify their discharge of certain debts, but can also also initiate possible referrals to the United States Department of Justice for criminal fraud and may even result in a filing of federal indictment with multiple counts of bankruptcy fraud for concealing and knowingly making false oaths and declarations.
Additionally, SBA debtors may have made misrepresentations in the origination of the SBA loan and during the servicing and work out stages with the Lender or SBA in their financial statements and written submissions to them. Lenders review these materials as part of their due diligence to protect their rights to collect on the SBA Guaranty and mitigate further damage to its and the SBA's recovery efforts.
In such instances, there may also be grounds by the Lenders (and even the SBA) to object to a Chapter 7 bankruptcy discharge or otherwise contest the bankruptcy in its entirety when borrowers or SBA loan guarantors engage in any such malfeasance. In these cases, adversarial proceedings in bankruptcy can be the forum through which lenders can resolve any guaranty affecting deficiencies contained within their files.
Dealing with the idea that you might be facing SBA loan default can be terrifying. The SBA attorneys in our office are skilled at helping clients understand all facets of their situations. If, for instance, you need to know what an SBA offer in compromise is, you can simply ask your lawyer. You should never face SBA loan problems alone. It is important to retain the services of an attorney who can help you through this difficult time in your life. We urge you to read about the services that we have available and to contact us if you believe that we can be of assistance to you right now.
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.
Our firm successfully assisted a client in closing an SBA Disaster Loan tied to a COVID-19 Economic Injury Disaster Loan (EIDL). The borrower obtained an EIDL loan of $153,800, but due to the prolonged economic impact of the COVID-19 pandemic, the business was unable to recover and ultimately closed.
As part of the business closure review and audit, we worked closely with the SBA to negotiate a resolution. The borrower was required to pay only $1,625 to release the remaining collateral, effectively closing the matter without further financial liability for the owner/officer.
This case highlights the importance of strategic negotiations when dealing with SBA settlements, particularly for businesses that have shut down due to unforeseen economic challenges. If you or your business are struggling with SBA loan debt, we focus on SBA Offer in Compromise (SBA OIC) solutions to help settle outstanding obligations efficiently.
Our firm successfully resolved an SBA 7(a) loan default in the amount of $140,000 on behalf of a husband-and-wife guarantor pair. The business had closed following a prolonged decline in revenue, leaving the borrowers personally liable for the remaining balance.
After conducting a comprehensive financial analysis and preparing a detailed SBA Offer in Compromise (SBA OIC) package, we negotiated directly with the SBA and the lender to achieve a settlement for $70,000 — just 50% of the outstanding balance. This settlement released the borrowers from further personal liability and allowed them to move forward without the threat of enforced collection.
Our firm successfully negotiated an SBA offer in compromise (SBA OIC), settling a $974,535.93 SBA loan balance for just $18,000. The offerors, personal guarantors on an SBA 7(a) loan, originally obtained financing to purchase a commercial building in Lancaster, California.
The borrower filed for bankruptcy, and the third-party lender (TPL) foreclosed on the property. Despite the loan default, the SBA pursued the offerors for repayment. Given their limited income, lack of significant assets, and approaching retirement, we presented a strong case demonstrating their financial hardship.
Through strategic negotiations, we secured a favorable SBA settlement, reducing the nearly $1 million debt to a fraction of the amount owed. This outcome allowed the offerors to resolve their liability without prolonged financial strain.
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