Small business owners need to re-evaluate their finances when they face a loan default. This occurrence could lead to devastating effects for the business. When they have a loan default through the Small Business Administration, they could face more than just a financial loss. They could lose everything they own quickly. A SBA Offer in Compromise is the first step for avoiding a total loss.
If the lender accepts a settlement, the borrower could achieve closure for the loan. Their attorney works with their lender to identify the most acceptable compromise. The offer of compromise includes a balance that is less than the total balance and allows the business owner to settle the debt quickly. Once the offer is accepted, the business owner no longer has any obligation to the lender.
If the borrower chose bankruptcy, first they would have to qualify for their chosen chapter. If they select chapter 13, they are required to pay a fixed balance each month. If they cannot pay this balance each month, the case is dismissed. When this occurs, they are responsible for all debts included immediately. Since the bankruptcy case remains on their credit history for at least ten years, it prevents them from opening new lines of credit. For companies that are trying to rebuild after financial issues, this could have disastrous effects. This is why the borrower must choose a compromise instead of bankruptcy when they have a SBA loan default.
If the borrower doesn't manage the default, they could face foreclosure. The moment they receive the SBA demand letter the wheels are in motion already. At this point, the lender has the right to seize property to settle the debt. Through a SBA loan foreclosure, the lender could acquire the business property and all assets.
Small business owners need assistance before they default on their SBA loan. By taking earlier action, they could avoid potential hardships that could lead to financial ruin. Business owners who need to discuss a compromise or enter into a Tax Offset Program should contact an attorney immediately.
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.
Small business sole proprietor obtained an SBA COVID-EIDL loan for $500,000. Client defaulted causing SBA to charge-off the loan, accelerate the balance and refer the debt to Treasury's Bureau of Fiscal Service for aggressive collection. Treasury added $180,000 in collection fees totaling $680,000+. Client tried to negotiate with Treasury but was only offered a 3-year or 10-year repayment plan. Client hired the Firm to represent before the SBA, Treasury and a Private Collection Agency. After securing government records through discovery and reviewing them, we filed an Appeals Petition with the SBA Office of Hearings & Appeals (OHA) court challenging the SBA's referral of the debt to Treasury citing a host of purported violations. The Firm was able to negotiate a reinstatement and recall of the loan back to the SBA, participation in the Hardship Accommodation Plan, termination of Treasury's enforced collection and removal of the statutory collection fees.
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 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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