What Does The New Chapter 11 Subchapter V Mean For Your SBA Loan?
Struggling small business or personal guarantors of an SBA loan can take advantage of the new Chapter 11 Subchapter V bankruptcy procedures.
We help people who need to avoid SBA loan default by advising about solutions to various SBA loan problems including SBA loan foreclosure.
Book a Consultation CallThe attorneys in our office want to help you figure out your SBA situation. No matter how difficult your circumstances may seem, the right lawyer can assist you. We understand that you probably have questions regarding a wide range of issues, including how to respond to an SBA demand letter, what SBA loan foreclosure actually entails, and what a tax offset program is. One of our specialists can tell you about all of these topics and more. We urge you to read our blog to learn more about subjects that are confusing to you and to contact us right away if you have specific questions. We look forward to working with you during this period of your life.
While a loan is classified in regular servicing status, it is housed in one of the SBA's two Commercial Loan Service Centers (CLSC) – either Fresno or Little Rock. The process begins when the SBA is notified by the appropriate CLSC that workout is not feasible and liquidation is necessary, the loan is then shipped to the National Guaranty Purchase Center (NGPC) logged in, and classified as in liquidation and then housed awaiting reports and status updates as to action taken commensurate to the loan. The loans are not assigned to any staff member and this Center handles most necessary actions by specialized teams. The NGPC will acknowledge the notification and the Lender will be expected to continue to service this account and completely liquidate or sue upon any loan instrument. The Lender is required to pursue the entire indebtedness regardless of the guaranteed percentage or any purchase thereof. Also note that SBA requires all lenders to make timely site visits to assess the value and take an inventory of loan collateral in order to assess workout possibilities and to develop a meaningful liquidation plan.
2. SBA Loan Management: Primary oversight will be centered around the guaranty purchase review process, timely quarterly updates, and through the thorough review of liquidation wrap-up reports which Lenders must submit to SBA at the completion of liquidation. Secondarily, SBA will monitor debt collection litigation, such as judicial foreclosures, bankruptcy proceedings and other state and federal insolvency proceedings, through the review of litigation plans when applicable and required by circumstances.
Key actions:
1. Guaranty purchase. This includes a detailed review of all origination, servicing, and liquidation actions to ensure that the loan was handled properly; this is done using the Guaranty Purchase 10 Tabs.
2. CPC Expenses. After the loan has been purchased, if there are liquidation expenses that are incurred the lender would be able to submit for reimbursement using CPC tabs.
3. Offer in Compromise. Typically at the culmination of the liquidation of all business and other worthwhile assets, and OIC is the process used to evaluate a monetary offer in exchange for the release of a personal guaranty on the loan. An Offer in Compromise is an action that requires SBA’s expressed written consent and may be submitted to SBA using the OIC Tabs.
4. Quarterly Updates. Once a loan has been purchased, SBA requires a simple update on a quarterly basis for every loan in liquidation status. This report should include the current actions being taken on the loan.
5. Charge off. Once all liquidation is complete and no further recoveries are expected the loan can then be charged off. This is done by the lender submitting a final wrap up report to SBA.
6. Referral to the US Treasury Offset Program Once the loan has been charged off by SBA, if there are any parties that are eligible (provided they have not been discharged from bankruptcy and/or they were not released as part of an Offer in Compromise) they will be referred to the U.S. Treasury Offset Program for further collection. Once this takes place the servicing of the loan shifts from the lender to Treasury or their fee agents. If any recoveries are received they will be shared with the lender, based on the guaranty rate, and the lender’s share will be forwarded to them (less any expenses incurred by Treasury).
If you'd like to learn more about the options you have for your SBA loan, call for a case evaluation at 1-888-756-9969.
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 executed personal and corporate guarantees for an SBA 7(a) loan from a Preferred Lender Provider (PLP). The borrower corporation defaulted on the loan exposing all collateral pledged by the Clients. The SBA subsequently acquired the loan balance from the PLP, including the right to collect against all guarantors. The SBA sent the Official Pre-Referral Notice to the guarantors giving them sixty (60) days to either pay the outstanding balance in full, negotiate a Repayment (Offer in Compromise (OIC) or Structured Workout (SW)), challenge their alleged guarantor liability or file a Request for Hearing (Appeals Petition) with the SBA Office of Hearings & Appeals.
Because the Clients were not financially eligible for an OIC, they opted for Structured Workout negotiations directly with the SBA before the debt was transferred to the Bureau of Fiscal Service, a division of the U.S. Department of Treasury for enforced collection.
The Firm was hired to negotiate a global Workout Agreement directly with the SBA to resolve the personal and corporate guarantees. After submitting the Structured Workout proposal, the assigned SBA Loan Specialist approved the requested terms in under ten (10) days without any lengthy back and forth negotiations.
The favorable terms of the Workout included an extended maturity at an affordable principal amount, along with a significantly reduced interest rate saving the Clients approximately $181,000 in administrative fees, penalties and interest (contract interest rate and Current Value of Funds Rate (CVFR)) as authorized by 31 U.S.C. § 3717(e) had the SBA loan been transferred to BFS.
Clients personally guaranteed an SBA 504 loan balance of $337,000. The Third Party Lender had obtained a Judgment against the clients. We represented clients before the SBA and negotiated an SBA OIC that was accepted for $30,000.
Our firm successfully facilitated the SBA settlement of a COVID-19 Economic Injury Disaster Loan (EIDL) where borrower received an SBA disaster loan of $150,000, but due to the severe economic impact of the COVID-19 pandemic, the business was unable to recover.
Despite the borrower’s efforts to maintain operations, shutdowns and restrictions significantly reduced the customer base and revenue, making continued operations unsustainable. After a thorough business closure review, we negotiated with the SBA, securing a resolution where the borrower paid only $6,015 to release the collateral, with no further financial liability for the owner/officer.
This case demonstrates how businesses affected by the pandemic can navigate SBA loan settlements effectively. If your business is struggling with an SBA EIDL loan, we specialize in SBA Offer in Compromise (SBA OIC) solutions to help close outstanding debts while minimizing financial burden.
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