Are you unsure of whether or not you need an SBA offer in compromise? Our team is here to help advise you as to when to seek out an offer in compromise.
Book a Consultation CallCurrently, the world faces unprecedented challenges. For many, these challenges have made it difficult to stay on top of SBA loan payments. In these difficult economic times, your business may not survive. Fortunately, you have options if you fall behind. If you need SBA loan relief, you may find that you qualify for an SBA Offer in Compromise (OIC). An OIC allows you to settle your SBA loan obligation for less than the total balance.
To learn more about when to seek out an Offer in Compromise, keep reading.
Offer in Compromise
The SBA doesn’t approve all requests for a settlement. For this reason, it’s a good idea to seek professional help so that you have the best chance of the agency accepting your request.
With an Offer in Compromise, you can settle your SBA debt for less than the full amount owed.
It’s a viable option if you cannot pay your SBA debt in full. For example, paying your SBA loan guarantee might cause financial hardship.
The SBA will consider several things when deciding whether to accept your settlement. As an example, they’ll assess your ability to pay your obligation.
They’ll also evaluate your current income and expenses. Furthermore, they’ll make a review of your existing assets.
Typically, the SBA will accept an OIC claim when the amount offered is what the agency deems reasonable to collect within a certain amount of time.
However, an Offer in Compromise is not for everyone who’s behind on their SBA loan. For example, if you apply for settlement, it’s important that you’re not filing for bankruptcy
For these reasons and others, it may prove prudent to seek professional help when applying for an Offer in Compromise. However, it’s equally as important to choose an SBA professional that’s skilled and experienced.
The Offer in Compromise program is legitimate and viable. The SBA doesn’t want to wait ten years to collect payments. Still, the agency understands that some people simply cannot afford to pay their full SBA loan obligation.
For this reason, the SBA provides the Offer in Compromise program to give certain individuals and businesses a fresh start. Under the program, the SBA will accept a settlement amount. The agency will then write off the remaining debt.
However, it’s important to understand that an Offer in Compromise is not an exercise in diplomacy. When you apply for an Offer in Compromise, it’s also not an arena to test your negotiating skills.
Some people mistakenly think that they can use negotiation tactics to solicit the best offer from the SBA. For instance, they may plan to start out making a lowball offer.
Alternatively, they may portray themselves as stubborn and walk away from discussing the Offer in Compromise on one or more occasions. By deploying these tactics, they believe that they can arrange a better deal.
However, the SBA determines the viability of a request for a settlement using math and legal factors called "litigative risks". They use a formula to determine the terms of an Offer in Compromise based on your allowable expenses, assets, and income. The same formula applies to every request.
Using the formula, SBA loan specialists determine the amount deemed reasonable to collect. They will not take an amount lower than what they determine using the formula. For this reason, it’s important to work with a legal professional who can help you to apply the formula correctly as well as assert legal defenses in your favor.
An experienced SBA attorney can help you calculate the correct amount when requesting a settlement. They understand the standards used by the SBA. For example, an experienced attorney knows what expenses you can deduct and which ones you cannot.
There are some gray areas in this regard. However, even the gray areas are based on clearly outlined allowed expenses.
When searching for counsel, stay away from any advisor who promises they can secure an Offer in Compromise without reviewing your situation. Nevertheless, an Offer in Compromise is worth considering if you’ve exhausted all other options. If you have minimal assets, live modestly, and have financial trouble, an Offer in Compromise may help you .
Now you know more about the SBA Offer in Compromise program. What you need now is an attorney that can guide you through the process.
Protect Law Group specializes in representing small business owners and federal debtors across the United States. We’ve helped companies resolve millions of dollars in debt.
Find out the best option for resolving your SBA-related debt. Contact a Protect Law Group attorney today at (833) 428-0933 or connect with us online to schedule a case evaluation.
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.
Client’s small business obtained an SBA 7(a) loan for $750,000. She and her husband signed personal guarantees exposing all of their non-exempt income and assets. With just 18 months left on the maturity date and payment on the remaining balance, the Great Recession of 2008 hit, which ultimately caused the business to fail and default on the loan terms. The 7(a) lender accelerated and sent a demand for full payment of the remaining loan balance. The SBA lender’s note allowed for a default interest rate of about 7% per year. In response to the lender's aggressive collection action, Client's husband filed for Chapter 7 bankruptcy in an attempt to protect against their personal assets. However, his bankruptcy discharge did not relieve the Client's personal guarantee liability for the SBA debt. The SBA lender opted to pursue the SBA 7(a) Guaranty and subsequently assigned the loan and the right to enforce collection against the Client to the SBA. The Client then received the SBA Official 60-Day Notice. After conducting a Case Evaluation with her, she then hired the Firm to respond and negotiate on her behalf with just 34 days left before the impending referral to Treasury. The Client wanted to dispute the SBA’s alleged debt balance as stated in the 60-Day Notice by claiming the 7(a) lender failed to liquidate business collateral in a commercially reasonable manner - which if done properly - proceeds would have paid back the entire debt balance. However, due to time constraints, waivers contained in the SBA loan instruments, including the fact the Client was not able to inspect the SBA's records for investigation purposes before the remaining deadline, Client agreed to submit a Structured Workout for the alleged balance in response to the Official 60-Day Notice as she was not eligible for an Offer in Compromise (OIC) because of equity in non-exempt income and assets. After back and forth negotiations, the SBA Loan Specialist approved the Workout proposal, reducing the Client's purported liability by nearly $142,142.27 in accrued interest, and statutory collection fees. Without the Firm's intervention and subsequent approval of the Workout proposal, the Client's debt amount (with accrued interest, Treasury's statutory collection fee and Treasury's interest based on the Current Value of Funds Rate (CVFR) would have been nearly $291,030.
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.
Clients' 7(a) loan was referred to Treasury's Bureau of Fiscal Service for enforced collection in 2015. They not only personally guaranteed the loan, but also pledged their primary residence as additional collateral. One of the clients filed for Chapter 7 bankruptcy thinking that it would discharge the SBA 7(a) lien encumbering their home. They later discovered that they were mistakenly advised. The Firm was subsequently hired to review their case and defend against a series of collection actions. Eventually, we were able to negotiate a structured workout for $180,000 directly with the SBA, saving them approximately $250,000 (by reducing the default interest rate and removing Treasury's substantial collection fees) and from possible foreclosure.
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