SBA Chief Maria Contreras-Sweet's Commencement Speech At Whittier
Protect Law Group has the legal expertise to guide you through the SBA offer in compromise process and help successfully resolve your SBA loan problems.
You don't have to deal with your SBA debt alone. The following is a guide for an effective SBA offer in compromise strategy.
Book a Consultation CallAre you currently struggling with SBA debt? You don't have to deal with this alone. The following is a guide for an effective SBA offer in compromise strategy.
If you're facing SBA loan default, the best choice you can make is to get help. It can be hard to know what to do in this situation, but reacting quickly and effectively is critical when it comes to reaching a settlement. Failing to address the problem only leads to more problems down the road and significant additional fees and costs.
This article will go through the three main elements of an effective SBA offer in compromise strategy including the three keys to an effective SBA offer in compromise.
What is an SBA offer in compromise? An SBA offer in compromise consists of paying a portion of the SBA to have the SBA consider the debt paid and thereafter will no longer seek collection from the alleged debtor.
The general requirements for compromise of a debt owed on an SBA loan are as follows:
Demonstrate That The Full Amount Of The SBA Loan Cannot Be Recovered Within A Reasonable Amount Of Time
You must show that you don’t have the means to pay the full amount of the debt within a reasonable amount of time. Naturally, the higher the debt, the less chance there is that you could pay the full amount of the debt. Usually, for instance, a person with a $35,000 debt will have a harder time showing an inability to pay within a reasonable amount of time than a person with a $2,000,000 debt.
In either case, an experienced SBA workout attorney can help show the SBA why the debtor cannot pay within a reasonable amount of time and why a SBA offer in compromise provides a better recovery for the SBA. Certain issues an SBA attorney can address include how to determine the value of real estate for purposes of an offer in compromise. Real estate may have a certain fair market value, but that value differs from what the SBA could reasonably expect to extract. An experienced SBA attorney can address those type of issues.
Other issues such as what is your disposable income every month require experienced analysis. You may be missing monthly deductions to your monthly income that show an inability to pay within a reasonable amount of time.
Your SBA offer in compromise strategy should establish significant litigative risk, i.e., a real doubt concerning the ability to prevail in court because of legal issues or factual disputes.
Only a qualified attorney can adequately address any litigative risk issues. The process includes obtaining the SBA loan file from the SBA and performing a detailed analysis of the documents therein. Are there issues with the personal guarantees? Are the loan documents in proper order? Is the amount being sought by the SBA correct? Did the SBA or bank make any misrepresentations? Were you provided proper due process? These issues and more may present a litigative risk that if presented properly will provide you with more leverage in negotiating an SBA offer in compromise and is part of an effective SBA offer in compromise strategy.
The SBA will not agree to an offer in compromise if it believes it could recover more by referring the debt to the Department of Treasury for collection. The Department of Treasury can use several collection tactics such as administrative wage garnishment, tax refund offset, federal payment offset and litigation to collect on the debt.
Your SBA offer in compromise must demonstrate that your settlement amount is a better deal that what the SBA could hope to collect through enforced collection via referral to the Department of Treasury. This requires a detailed analysis of what the government would hope to collect through enforced collection. As such, a successful SBA offer in compromise should “do the math” regarding enforced collection. Naturally, an experienced SBA attorney is best suited to perform this analysis.
Conclusions
An attorney can help you come out of the SBA loan default process on top with an effective SBA offer in compromise strategy. Remember, hiding your head in the sand when faced with an SBA loan default will only result in more pain down the line. Once your debt is referred to the Department of Treasury, the Department of Treasury adds 28%-30% to the debt. This means, for instance, for every $100,000 the SBA alleges you owe, once the SBA refers it to the Department of Treasury an additional $28,000 - $30,000 gets tacked on to the debt.
By providing the best legal help, an SBA attorney can fight for your rights and protect you much better than you could on your own or with an inexperienced attorney or non-attorney. Protect Law Group knows the ins and outs of an effective SBA offer in compromise strategy.
Do you have more questions about your SBA offer in compromise? Set up a consultation today with an experienced SBA workout attorney.
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.
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.
Client personally guaranteed SBA 7(a) loan balance of $58,000. The client received a notice of Intent to initiate Administrative Wage Garnishment (AWG) Proceedings. We represented the client at the hearing and successfully defeated the AWG Order based on several legal and equitable grounds.
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