The SBA Doesn't Track State by State SBA Loan Defaults
We will analyze your SBA loan problems and advise you on potential solutions such as an SBA offer in compromise for your SBA loan default.
Small businesses facing mounting debt obligation from an SBA loan may seek a small business reorganization under the new bankruptcy law.
Book a Consultation CallThe rapid deterioration of the American job market (and the world job market) will make it tough on San Diego businesses in the coming months. The new Chapter 11 Subchapter V bankruptcy may provide an easier solution for small businesses. A small business reorganization may save your business.
Employment
No matter how you slice it, the employment picture does not bode well for small businesses. With people out of work, less money will be spent in the economy and at your business. Unfortunately, this will further negatively affect employment. Even with the Payment Protection Program and various deferments, the situation does not look good for small businesses. For many small businesses, an SBA 7a or 504 loan consists of the main debt obligation. Without a small business reorganization, the lender and / or the SBA can attempt to collect.
Like many businesses, your business may be facing a downturn. The options may seem few. Lending programs, like the SBA's Disaster Loan program, may help but serve to add debt to an existing debt problem. The regular Chapter 11 bankruptcy provides protection from creditors while a business reorganizes its debts, but it remains a costly and time-consuming option. If the situation exists as too dire, your business could just shut its doors. But, as a small business owner, you may still owe on your business debts as a personal guarantor. For instance, you will remain personally liable on an SBA loan even if your business closes its doors.
The new Chapter 11 bankruptcy went into effect in February of 2020. As such, a small business whose main debt consists of an SBA loan may use the new bankruptcy to reorganize the debt. Therefore, a bankruptcy reorganization may enable your small business to quickly and efficiently restructure its SBA debt. By reorganizing the debt, your small business may reduce its monthly debt obligation to coincide with its cash flow. A reorganization bankruptcy would allow your small business to continue operating.
If your San Diego County small business needs reorganization of its SBA loan debt, talk to one of our experienced attorneys today.
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 an SBA 7(a) loan that was referred to the Department of Treasury for collection. Treasury claimed our clients owed over $220,000 once it added its statutory collection fees and interest. We were able to negotiate a significant reduction of the total claimed amount from $220,000 to $119,000, saving the clients over $100,000 by arguing for a waiver of the statutory 28%-30% administrative fees and costs.
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 $324,000 to buy a small business and its facility. The business and real estate had an appraisal value of $318,000 at the time of purchase. The business ultimately failed but the participating lender abandoned the business equipment and real estate collateral even though it had valid security liens. As a result, the lender recouped nearly nothing from the pledged collateral, leaving the business owners liable for the deficiency balance. The SBA paid the lender the 7(a) guaranty money and was assigned ownership of the debt, including the right to collect. However, the clients never received the SBA Official 60-Day Notice and were denied the opportunity to negotiate an Offer in Compromise (OIC) or a Workout directly with the SBA before being transferred to Treasury's Bureau of Fiscal Service, which added an additional $80,000 in collection fees. Treasury garnished and offset the clients' wages, federal salary and social security benefits. When the clients tried to negotiate with Treasury by themselves, they were offered an unaffordable repayment plan which would have caused severe financial hardship. Clients subsequently hired the Firm to litigate an Appeals Petition before the SBA Office & Hearings Appeals (OHA) challenging the legal enforceability and amount of the debt. The Firm successfully negotiated a term OIC that was approved by the SBA Office of General Counsel, saving the clients approximately $205,000.
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