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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 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 personally guaranteed SBA 7(a) loan balance of over $150,000. Business failed and eventually shut down. SBA then pursued client for the balance. We intervened and was able to present an SBA OIC that was accepted for $30,000.
Clients borrowed and personally guaranteed an SBA 7a loan. Clients defaulted on the SBA loan and were sued in federal district court for breach of contract. The SBA lender demanded the Client pledge several personal real estate properties as collateral to reinstate and secure the defaulted SBA loan. We were subsequently hired to intervene and aggressively defend the lawsuit. After several months of litigation, our attorneys negotiated a reinstatement of the SBA loan and a structured workout that did not involve any liens against the Client's personal real estate holdings.
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