Your small business has failed ... The loan has been in default for years … The business has shut down … all business property, equipment, inventory and/or commercial real estate has been been liquidated, foreclosed or repossessed.
The originating lender has opted not to file a lawsuit against you on your personal guarantees. You think that everything is over … however, several years later, you receive a Notice from the SBA claiming you owe them a ton of money and need to contact them within 60 days of this Notice or you get a Collection Letter from the Treasury Department’s Bureau of Fiscal Service claiming that you owe the SBA an old debt and if you don’t contact them with arrangements for repayment, they will add up to 30% of the original balance to the SBA debt. What do you do?
First, if you received the Official 60-Day Notice from the SBA, do NOT ignore it (click here to view a Sample Official 60-Day Notice). There can be severe consequences if you do. The 60-Day Notice gives you a one-time opportunity to resolve your SBA debt either through an Offer in Compromise (where you pay a lesser amount based on unique factors pertinent to your case) or a Repayment Agreement (an agreed-upon installment pay-back plan, preferably for a lesser amount owed) with the SBA.
Second, if you received a Collection Letter from Treasury, do NOT ignore it (click here to view a Sample Collection Letter). However, you should not attempt to contact Treasury by yourself to try and resolve the debt as you do not want to acknowledge you owe the debt as alleged or provide them with any financial information because you could hurt your own negotiating position. Once your SBA debt has been transferred from the SBA to the Treasury Department’s Bureau of Fiscal Service, you may receive a series of collection letters and phone calls demanding that you contact Treasury.
Treasury’s collection agents say that they will only entertain settlement offers at a 20% discount if you pay the total amount (principal SBA debt balance plus up to 30% in accrued interest, penalties and administrative costs) if you pay them within 30 days. For example, if your alleged SBA debt is $200,000 and the accrued interest, penalties and costs is $60,000, totaling $260,000, Treasury’s collection agents will tell you they’ll settle your debt for $208,000 (80% of total SBA debt claimed with accruals). But, you must pay the $208,000 within 30 days of accepting Treasury's offer. Or, you can agree to their repayment agreement where you will have to pay $7,222 a month for the next 36 months (3 year term). For most folks, these settlement offers are virtually impossible to accept. If, however, you don’t accept their harsh offers, Treasury will then engage in enforced collection and use a series of administrative collection tools, such as Administrative Wage Garnishment (AWG), Treasury Offset against your federal salary, pension, benefits, contractor payments and/or tax refunds. Private collection agencies can be brought in to help them collect the outstanding debt. Further, your SBA debt can also be referred to the Department of Justice for collection litigation
Therefore, if your case is still with the SBA, it’s best to respond to the 60-Day Official Notice and petition for an SBA Offer in Compromise or, if you don’t qualify for an SBA OIC, to negotiate a Repayment Agreement. But if your case has been transferred to Treasury, and if there are grounds to do so, you should try to recall your debt back to the SBA. If you did NOT receive the Official 60-Day Notice from the SBA, you will want to hire qualified attorneys to leverage your rights to try and get your case recalled from Treasury back to the SBA for resolution.
If you need help with an SBA offer in compromise or would like to know if your SBA debt can be recalled from Treasury Department’s Bureau of Fiscal Service, contact us today for a Free initial case evaluation with an experienced SBA and Treasury workout attorney at 1-888-756-9969
We can analyze your prospects for an SBA offer in compromise, help neutralize Treasury’s aggressive collection demands and find out if your case is eligible for recall from Treasury back to the SBA.
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 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.
Client personally guaranteed an SBA 7(a) loan for $100,000 from the lender. The SBA loan went into early default in 2006 less than 12 months from disbursement. The SBA paid the 7(a) guaranty monies to the lender and subsequently acquired the deficiency balance of about $96,000, including the right to collect against the guarantor. However, the SBA sent the Official 60-Day Due Process Notice to the Client's defunct business address instead of his personal residence, which he never received. As a result, the debt was transferred to Treasury's Bureau of Fiscal Service where substantial collection fees were assessed, including accrued interest per the promissory note. Treasury eventually referred the debt to a Private Collection Agency (PCA) - Pioneer Credit Recovery, Inc. Pioneer sent a demand letter claiming a debt balance of almost $310,000 - a shocking 223% increase from the original loan amount assigned to the SBA. Client's social security disability benefits were seized through the Treasury Offset Program (TOP). Client hired the Firm to represent him as the debt continued to snowball despite seizure of his social security benefits and federal tax refunds as the involuntary payments were first applied to Treasury's collection fees, then to accrued interest with minimal allocation to the SBA principal balance.
We initially submitted a Cross-Servicing Dispute (CSD) challenging the referral of the debt to Treasury based on the defective notice sent to the defunct business address. Despite overwhelming evidence proving a violation of the Client's Due Process rights, the SBA still rejected the CSD. As a result, an Appeals Petition was filed with the SBA Office of Hearings & Appeals (OHA) Court challenging the SBA decision and its certification the debt was legally enforceable in the amount claimed. After several months of litigation before the SBA OHA Court, our Firm Attorney successfully negotiated an Offer in Compromise (OIC) Term Workout with the SBA Supervising Trial Attorney for $82,000 spread over a term of 74 months at a significantly reduced interest rate saving the Client an estimated $241,000 in Treasury collection fees, accrued interest (contract interest rate and Current Value of Funds Rate (CVFR)), and the PCA contingency fee.
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.
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