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The SBA Offer in Compromise: Avoiding Property Loss and Additional Legal Issues After a Loan Default

When a business venture begins to stumble it becomes very easy to fall behind with the bills. When one of those debts is for an SBA loan the person who signed for the loan must handle the situation correctly to protect their credit and their property. An SBA loan foreclosure is a terrifying prospect for anyone who is facing the loss of their income and personal property used as collateral for the loan. It is important to get assistance from an expert prior to reaching this point.

The first contact business owners will have regarding their late payments is usually an SBA demand letter requesting the amount that is late. Of course, people receiving these notices often do not have the income necessary to make the payments or they would have already done so. It may be possible at this point to get a loan deferment if the income shortage is a provable short term issue. This is not always possible to prove and not always the reason for the late payments. A deferment will not help a business that is failing and has no clear plan for recovery.

Instead, an SBA Offer in Compromise is the best solution. This is done when the business has no ability to continue operating or a plan to restructure successfully. It is often beneficial to the borrower and lender both because it avoids additional legal expenses. This process is basically a debt forgiveness plan where the borrower pays a lump sum to the lender and the remainder of the loan is forgiven.

Many people who have reached the point of needing an SBA Offer in Compromise will also require legal assistance through a Tax Offset Program too. This may be due to overdue tax payments because of a lack of income or it could be the tax bill they received after their compromise deal. Any amount that is forgiven on a debt is considered income and taxes are owed for that income.

An SBA loan default is a serious legal issue that no one should attempt to handle on their own. Legal advice and assistance is necessary to prevent any loss of property. Seeking advice as soon as financial problems begin will make it possible for the business owner to have more options in how they proceed.

We are here to help you with your SBA loan problems.

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