What the SBA’s 43% Workforce Reduction Could Mean for Your SBA Loan in 2025
Defaulting on a SBA loan with the Trump Administration's reduction in SBA staff will impact your chances for resolution. Learn about the impact and how to protect yourself.
We are attorneys that exclusively work on SBA OIC cases and other federal debt issues.
Book a Consultation CallThe Massachusetts Bankruptcy Court, pursuant to an enforcement action brought by the United States Trustee, ordered sanctions and issued an injunction against a bankruptcy petition preparer in Lawrence, Massachusetts. The case can be found here. The petition preparer, Pinnacle Financial Consulting, LLC (“Pinnacle”) along with its owner, were ordered to pay monetary sanctions, return money to bankruptcy debtors and were enjoined from filing any future bankruptcy petitions in Massachusetts.
The gist of the U.S. Trustee’s complaint and the Court’s findings was that Pinnacle engaged in the unauthorized practice of law when it charged consumers for the preparation of bankruptcy petitions. There were no lawyers at Pinnacle. However, the fact that Pinnacle’s president went to law school (but never was admitted to the bar) was used to suggest to consumers that the company had legal expertise. In fact, Pinnacle touted a “Pinnacle System” that it suggested had significant value. Non-attorney bankruptcy petition preparers are not illegal, per se, but they are not allowed to advise clients or do anything more than simply type forms. By emphasizing its supposed expertise, Pinnacle was acting as more than just a typist, and it encroached on a province only allowed to licensed attorneys.
It turns out for good reason. Consumers are usually harmed by operators who talk a good game but who are unregulated and unaccountable. In this case, Pinnacle falsely advertised its discharge rate, and it also guided clients on how to claim the Minnesota exemptions instead those in place here in Massachusetts.
It is in immigrant communities, like Lawrence, Massachusetts, that these types of organizations usually thrive. In Latino communities, especially, such organizations have a special ability to mislead because, in certain Latin American countries, the popular term “notario” has a very different meaning from the term “notary” here. To help protect consumers, the U.S. Trustee should consider bringing more enforcement actions of this nature.
Though consumers sometimes think that the bankruptcy systems will protect them simply because they are needy and hard-up, that is not always the case. Bankruptcy is an adversarial process, and there is little recourse for a consumer who loses property or has his case dismissed due to filing errors or poor strategic choices.
In the SBA context, there are many non-attorney firms advertising their SBA loan debt resolution services. However, as noted above, the same argument can apply and questions need to be answered as such, "can non-attorney bankers or former disbarred attorneys represent an SBA debtor's interest when he or she is not authorized to advise on legal matters such as SBA administrative law (i.e. SBA SOPs, Code of Federal Regulations (CFRs), federal law, bankruptcy issues and exemptions) or appeal your case to the SBA Office of Hearing & Appeals and be able to argue SBA OHA decisions and other procedural and substantive legal issues before an Administrative Law Judge (ALJ)?"
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 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.
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.
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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