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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.
Client personally guaranteed an SBA 7(a) loan to help with a relative’s new business venture. After the business failed, Treasury was able to secure a recurring Treasury Offset Program (TOP) levy against his monthly Social Security Benefits based on the claim that he owed over $1.2 million dollars. We initially submitted a Cross-Servicing Dispute, but then, prepared and filed an Appeals Petition with the SBA Office of Hearings and Appeals (SBA OHA). As a result of our efforts, we were able to convince the SBA to not only terminate the claimed debt of $1.2 million dollars against our client (without him having to file bankruptcy) but also refund the past recurring amounts that were offset from his Social Security Benefits in connection with the TOP levy.
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.
Client received the SBA's Official 60-Day Notice for a loan that was obtained by her small business in 2001. The SBA loan went into default in 2004 but after hearing nothing from the SBA lender or the SBA for 20 years, out of the blue, she received the SBA's collection due process notice which provided her with only one of four options: (1) repay the entire accelerated balance immediately; (2) negotiate a repayment arrangement; (3) challenge the legal enforceability of the debt with evidence; or (4) request an OHA hearing before a U.S. Administrative Law Judge.
Client hired the Firm to represent her with only 13 days left before the expiration deadline to respond to the SBA's Official 60-Day Notice. The Firm attorneys immediately researched the SBA's Official loan database to obtain information regarding the 7(a) loan. Thereafter, the Firm attorneys conducted legal research and asserted certain affirmative defenses challenging the legal enforceability of the debt. A written response was timely filed to the 60-Day Notice with the SBA subsequently agreeing with the client's affirmative defenses and legal arguments. As a result, the SBA rendered a decision immediately terminating collection of the debt against the client's alleged personal guarantee liability saving her $50,000.
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