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What Is A "Charge Off" Of An SBA Loan?

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What Is A "Charge Off" Of An SBA Loan?

If You Owe More than $30,000 Contact us for a Case Evaluation at: (833) 428-0933

You may have learned that your defaulted SBA loan was "charged off".  You are still liable for the loan deficiency, however, and competent legal counsel is highly recommended.

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The transcript of the video follows below for further review.

What is SBA's Policy Regarding Charge Off Accounts? Many times people think that because their defaulted SBA loan has been “charged off” they are not longer liable to the SBA. Unfortunately, this is not the case. “Charge off” is the process by which SBA recognizes a loss and removes the uncollectible loan account from its active receivable accounts. The SBA's policy is to be diligent and thorough in collection of debt and to promptly charge off all uncollectible accounts to more accurately reflect the status of the individual account and the Agency's entire portfolio. It should be noted that a charge off is merely an administrative determination that does NOT affect SBA's rights against any obligor nor reduce the SBA's (or a participant lender's) ability to proceed with any available remedy. A charge off is justified when the third party lender has complied with all requirements of collection and liquidation and further collection of any substantial portion of the debt is doubtful. The determination to justify a charge off may be based on one or more of the following:

a) The third party lender has exhausted all efforts in cost-effective recovery from:

Voluntary payments from the borrower;

Liquidation of collateral;

Compromise with obligor leaving only a deficiency balance; and

Consideration has been given to any legal remedies available so that no further reasonable expectation of recovery remains.

b) Estimated costs of future collection exceed any anticipated recovery;

c) Obligor cannot be located or is judgment proof;

d) The Lender/SBA's rights have expired (e.g., statute of limitations, restrictions of State law, Agency policy);

e) Debt is legally without merit;

f) Adjudication of a Chapter 7 Bankruptcy as a no asset case, or completion of Chap 11/13 case;

g) The inability of the Lender to effect further worthwhile recovery.

If your defaulted SBA loan has been charged off you will still need an experienced attorney to help negotiate a settlement. Contact Protect Law Group today at (888) 756-9969 or at www.sba-attorneys.com and schedule your consultation with an SBA workout attorney.

We analyze your SBA loan problems and advise you on potential solutions such as an SBA offer in compromise for your SBA loan default.

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Helping provide real solutions to individuals who are facing SBA loan problems. Contact one of our experienced SBA Attorneys and Federal Agency Practitioners today for a Case Evaluation - (888) 756-9969. 

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Why Hire Us to Help You with Your Treasury or SBA Debt Problems?

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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

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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.

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As part of the business closure review, we worked closely with the SBA to negotiate a resolution. The borrower was required to pay only $1,625 to release the remaining collateral, effectively closing the matter without further financial liability.

This case highlights the importance of strategic negotiations when dealing with SBA settlements, particularly for businesses that have shut down due to unforeseen economic challenges. If you or your business are struggling with SBA loan debt, we focus on SBA offer in compromise (SBA OIC) solutions to help settle outstanding obligations efficiently.

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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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