Can the SBA Seize Assets from an Estate After the Business Owners Pass Away?
Protect Law Group can provide the path forward for SBA debtors and guarantors before claims are made against your estate. Book a consultation call with us today!
One of the consequences of a failing small business is SBA loan default. The owner ends up with the debt of the small business association (SBA) loan. There are a few avenues to take, once a SBA demand letter has been received. The first thing a failed business owner needs to do is hire a federally licensed SBA attorney and Treasury debt practitioner. That specialization means the attorney can handle a case once it has been referred to the Treasury. Non-legal entities cannot provide negotiation services from that point forward.
An SBA Offer in Compromise is one way to settle the debt without foreclosure or filing bankruptcy. A case evaluation by the attorney will determine if owners are eligible for this option. The Offer in Compromise (OIC) is available when a business has failed due to mismanagement of finances. The basic requirements are that the business is no longer operational, and assets have already been liquidated. A negotiation can reduce the debt by as much as eighty percent. Lenders prefer to settle for a one lump sum, but payments can be made in installments under certain circumstances.
Another avenue is a Tax Offset Program in which the lender seizes the tax returns of the failed business owner every year, until the balance of the loan is paid off. That seems extreme, but can save the owner from a SBA loan foreclosure. In a foreclosure, the lender seizes any property listed on the loan documentation. If the value of the property does not cover the debt, the borrower's home could be seized, if it was purchased with company funds. That is a substantial risk to to take.
Negotiations cannot begin until a letter is received, which is usually ninety days after the last loan payment was made. From that point, collection efforts will be fast and aggressive. Business assets, including bank accounts and property, can be seized immediately. It is wise not to wait that long to contact an attorney. Getting help as soon as the business fails allows time for the attorney to review the case, explain possible options, answer any questions, and let the owner know what to expect.
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.
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.
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.
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