The Debt Collection Improvement Act
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.
We help people who need to avoid SBA loan default by advising about solutions to various SBA loan problems including SBA loan foreclosure.
Book a Consultation CallThe attorneys in our office want to help you figure out your SBA situation. No matter how difficult your circumstances may seem, the right lawyer can assist you. We understand that you probably have questions regarding a wide range of issues, including how to respond to an SBA demand letter, what SBA loan foreclosure actually entails, and what a tax offset program is. One of our specialists can tell you about all of these topics and more. We urge you to read our blog to learn more about subjects that are confusing to you and to contact us right away if you have specific questions. We look forward to working with you during this period of your life.
While a loan is classified in regular servicing status, it is housed in one of the SBA's two Commercial Loan Service Centers (CLSC) – either Fresno or Little Rock. The process begins when the SBA is notified by the appropriate CLSC that workout is not feasible and liquidation is necessary, the loan is then shipped to the National Guaranty Purchase Center (NGPC) logged in, and classified as in liquidation and then housed awaiting reports and status updates as to action taken commensurate to the loan. The loans are not assigned to any staff member and this Center handles most necessary actions by specialized teams. The NGPC will acknowledge the notification and the Lender will be expected to continue to service this account and completely liquidate or sue upon any loan instrument. The Lender is required to pursue the entire indebtedness regardless of the guaranteed percentage or any purchase thereof. Also note that SBA requires all lenders to make timely site visits to assess the value and take an inventory of loan collateral in order to assess workout possibilities and to develop a meaningful liquidation plan.
2. SBA Loan Management: Primary oversight will be centered around the guaranty purchase review process, timely quarterly updates, and through the thorough review of liquidation wrap-up reports which Lenders must submit to SBA at the completion of liquidation. Secondarily, SBA will monitor debt collection litigation, such as judicial foreclosures, bankruptcy proceedings and other state and federal insolvency proceedings, through the review of litigation plans when applicable and required by circumstances.
Key actions:
1. Guaranty purchase. This includes a detailed review of all origination, servicing, and liquidation actions to ensure that the loan was handled properly; this is done using the Guaranty Purchase 10 Tabs.
2. CPC Expenses. After the loan has been purchased, if there are liquidation expenses that are incurred the lender would be able to submit for reimbursement using CPC tabs.
3. Offer in Compromise. Typically at the culmination of the liquidation of all business and other worthwhile assets, and OIC is the process used to evaluate a monetary offer in exchange for the release of a personal guaranty on the loan. An Offer in Compromise is an action that requires SBA’s expressed written consent and may be submitted to SBA using the OIC Tabs.
4. Quarterly Updates. Once a loan has been purchased, SBA requires a simple update on a quarterly basis for every loan in liquidation status. This report should include the current actions being taken on the loan.
5. Charge off. Once all liquidation is complete and no further recoveries are expected the loan can then be charged off. This is done by the lender submitting a final wrap up report to SBA.
6. Referral to the US Treasury Offset Program Once the loan has been charged off by SBA, if there are any parties that are eligible (provided they have not been discharged from bankruptcy and/or they were not released as part of an Offer in Compromise) they will be referred to the U.S. Treasury Offset Program for further collection. Once this takes place the servicing of the loan shifts from the lender to Treasury or their fee agents. If any recoveries are received they will be shared with the lender, based on the guaranty rate, and the lender’s share will be forwarded to them (less any expenses incurred by Treasury).
If you'd like to learn more about the options you have for your SBA loan, call for a case evaluation at 1-888-756-9969.
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.
Client personally guaranteed SBA 7(a) loan for $150,000. COVID-19 caused the business to fail, and the loan went into default with a balance of $133,000. Client initially hired a non-attorney consultant to negotiate an OIC. The SBA summarily rejected the ineligible OIC and the debt was referred to Treasury’sBureau of Fiscal Service for enforced collection in the debt amount of $195,000. We were hired to intervene and initiated discovery for SBA and Fiscal Service records. We were able to recall the case from Fiscal Service back to the SBA. We then negotiated a structured workout with favorable terms that saves the client approximately $198,000 over the agreed-upon workout term by waiving contractual and statutory administrative fees, collection costs, penalties, and interest.
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.
Clients' 7(a) loan was referred to Treasury's Bureau of Fiscal Service for enforced collection in 2015. They not only personally guaranteed the loan, but also pledged their primary residence as additional collateral. One of the clients filed for Chapter 7 bankruptcy thinking that it would discharge the SBA 7(a) lien encumbering their home. They later discovered that they were mistakenly advised. The Firm was subsequently hired to review their case and defend against a series of collection actions. Eventually, we were able to negotiate a structured workout for $180,000 directly with the SBA, saving them approximately $250,000 (by reducing the default interest rate and removing Treasury's substantial collection fees) and from possible foreclosure.
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