Navigating SBA Offer in Compromise: A Step-by-Step Guide
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This is a re-post of articles about Minnesota State Senator, Sean Nienow and his wife, Cynthia, who, along with their company, National Camp Association, Inc. have been sued by the United States Department of the Treasury for approximately $748,000 in connection with an SBA loan default.
The lawsuit was filed January 17, 2014 with the U.S. District Attorney’s Office in Minneapolis for failure to make payments on a $613,000 small-business loan.
The complaint states that on January 16, 2009, the Small Business Association (SBA), through U.S. Bank, provided a loan to National Camp Association, Inc. The note was signed by Sean Nienow as the president and secretary of National Camp Association, Inc., and was personally guaranteed by the Nienows.
According to Isanti County court documents, Sean Nienow purchased the assets of National Camp Association, Inc, a New York corporation, for the amount of $699,000. He paid $621,000 on January 22, 2009, the day of closing, and promised to pay $30,000 plus accrued interest by January 16, 2011.
On October 11, 2011, Nienow and National Camp Association, Inc. were served with default and failure to make payments on any of the $30,000 or accrued interest, according to the lawsuit filed in Isanti County.
Isanti County District Judge Edward Bearse ordered Nienow to pay $7,755 to the New York company.
The business, described by various news sources as an organization helping parents find camps for their children, filed with the Minnesota Secretary of State on May 29, 2008 with Sean Nienow as its chief executive officer.
The registered office address was an unlisted address next to the Nienow’s home in Cambridge.
“There was no letter or permit application for a home occupation permit for the camp business,” said Lynda Woulfe, Cambridge city administrator. “It would have required one because they were conducting business out of the home.”
The intent of the home occupation permit is to allow limited passive commercial-type uses in a residential area to not detract from the character and integrity of residential neighborhoods. The home occupancy statute lists conditions and provisions such as utility usage not exceed that which is normally associated with the residence.
The U.S. Bank loan was guaranteed through SBA. This is usually done when the bank wants to loan the money, but the company may not have a lot of collateral, said Royce Nelligan, SBA district council. The SBA guarantee is typically 70 percent of the total loan.
The complaint states that the Nienows stopped making payments on the loan in July 2010. The principal balance is for $558,076.53. With administrative costs, attorney’s fees, and postjudgement interest, the lawsuit is asking for $747,937.62.
National Camp Association, Inc. was dissolved August 1, 2012, according to the Secretary of State’s website.
The complaint states demand for payment was made, but the defendants have not complied.
Nienow released a statement that the lawsuit is not related to any of his legislative duties. He is not taking any calls on the case.
“I have not yet received a copy of the legal filing in question,” Nienow said in his statement. “But it is clearly not related at all to any of my Minnesota Legislative duties. As with all pending actions of this sort, discussion of any details cannot take place until it is fully resolved.”
Nienow had previously served two terms, starting in 2003 and 2005, but was unseated by Rick Olseen (D-Harris). Nienow won back his seat in November 2010, and has held two additional terms, starting in 2011 and 2013. His seat is up for election in 2016.
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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 personally guaranteed SBA 504 loan balance of $750,000. Clients also pledged the business’s equipment/inventory and their home as additional collateral. Clients had agreed to a voluntary sale of their home to pay down the balance. We intervened and rejected the proposed home sale. Instead, we negotiated an acceptable term repayment agreement and release of lien on the home.
Client’s small business obtained an SBA 7(a) loan for $750,000. She and her husband signed personal guarantees exposing all of their non-exempt income and assets. With just 18 months left on the maturity date and payment on the remaining balance, the Great Recession of 2008 hit, which ultimately caused the business to fail and default on the loan terms. The 7(a) lender accelerated and sent a demand for full payment of the remaining loan balance. The SBA lender’s note allowed for a default interest rate of about 7% per year. In response to the lender's aggressive collection action, Client's husband filed for Chapter 7 bankruptcy in an attempt to protect against their personal assets. However, his bankruptcy discharge did not relieve the Client's personal guarantee liability for the SBA debt. The SBA lender opted to pursue the SBA 7(a) Guaranty and subsequently assigned the loan and the right to enforce collection against the Client to the SBA. The Client then received the SBA Official 60-Day Notice. After conducting a Case Evaluation with her, she then hired the Firm to respond and negotiate on her behalf with just 34 days left before the impending referral to Treasury. The Client wanted to dispute the SBA’s alleged debt balance as stated in the 60-Day Notice by claiming the 7(a) lender failed to liquidate business collateral in a commercially reasonable manner - which if done properly - proceeds would have paid back the entire debt balance. However, due to time constraints, waivers contained in the SBA loan instruments, including the fact the Client was not able to inspect the SBA's records for investigation purposes before the remaining deadline, Client agreed to submit a Structured Workout for the alleged balance in response to the Official 60-Day Notice as she was not eligible for an Offer in Compromise (OIC) because of equity in non-exempt income and assets. After back and forth negotiations, the SBA Loan Specialist approved the Workout proposal, reducing the Client's purported liability by nearly $142,142.27 in accrued interest, and statutory collection fees. Without the Firm's intervention and subsequent approval of the Workout proposal, the Client's debt amount (with accrued interest, Treasury's statutory collection fee and Treasury's interest based on the Current Value of Funds Rate (CVFR) would have been nearly $291,030.
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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