It’s not automatic, the SBA offer in compromise process REQUIRES bank support
I have stated in the past that once we liquidate the assets, which we do with the bank, we then move onto the SBA for the Offer in Compromise, the bank gets their guaranty and on we go to work out the final stage, the personal guaranty, with the SBA.
There is however one more factor to consider and it’s a tricky one. The bank does in fact have the authority to block the offer in compromise application, preventing the SBA from even considering the application and leaving you trapped in limbo land forced to somehow convince the bank to allow you to move on to the SBA and the Offer in Compromise.
There are no standards, no guidelines and each bank is allowed to hold you hostage and shake you down as best they can to satisfy themselves that they have done their best to get the most out of you, regarding the payback of the loan…and then the SBA does it again with the Offer in Compromise process.
I have confronted this issue many times and it is purely a bank prerogative. Sometimes it never even enters the conversation and the bank merely processes you through to the SBA for Offer in Compromise consideration, other times they stop us cold and want more, and we have to find a way to satisfy this demand.
If no cash then a note, but some further consideration for he losses the bank will incur, despite the guaranty proceeds they will receive. There is no appeal, no higher authority, the SBA defers completely to the bank and this is the trickiest ‘no mans land’ in the entire process. Each bank that does this has its own requirements, and we work through this situation with care and caution. Some banks are easier to work this out then others, and the others can be very daunting indeed.
I am involved in a few such situations at this moment and while the borrowers have been cleaned out completely, and are losing their real estate, have lost their business and at the moment have absolutely nothing to offer, the bank wants something more to be satisfied they have done their best before allowing the Offer in Compromise to move on to the SBA.
This is a very difficult situation as we have nothing to offer, the borrowers have no income stream and have lost all their assets and remaining real estate is completely under water and in default.
The answer is as always, have patience, perseverance and we will work this out, and we will.
The point is that in this critical junction, we must remain focused, clear and steadfast as there is a path through this part of the maze, it simply requires unearthing the trail. This is the one part that we are in the proverbial ‘tunnel of horrors’ and must truly ‘work it out’ with skill and care.
There is always an answer and always a resolution, it is however not always clear and if stymied, it requires diligence, compromise and cooperation. The tunnel of horrors…a perfect analysis, as in the end there is light.
Call me for help if you are stuck in the tunnel, it may take some extra support to navigate successfully. 413-584-2581. Norm will arrange a no obligation teleconference. Visit our SBA Offer in Compromise section to learn more about this process.
This blog’s great!! Thanks
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Thank you once again. So my after the business asset is liquidated, both the SBA and bank can come after you? Do both are allowed to send you 1099 in the case of SBA loan? If you offer something that is accepted then can you negotiate for 1099? or they will issue 1099 anyway?
Hi,
great site. what are the documents required to negotiate with SBA? What do they normally ask? Check Stubs, Bank Statements? What else? Please guide.
Thank you.
My husband and I are currently stuck in the “tunnel of horrors”. Thanks for the information because I was wondering why the bank has the right of first refusal. Even though they said they submitted our offer to SBA, I realized later they just use that as a tactic as they request more information saying that SBA wants the information. Why don’t they do their due diligence up front is beyond me. Here’s the frustration… The bank provided the note based on the value of our properties to secure the loan, which we have 2. The bank just received the appraisal value and one (our main home) is mortgaged to the exact value appraised. Our second home has negative equity of approximately $80K. The second home also has a second mortgage with the same bank that provided the SBA loan. I’m trying to use this as leverage for the bank to back off since they would lose $30K if we sold the property. Not sure if I have succeeded because I think they are just regrouping to find out how to respond. Any recommendations?
Thanks for putting up this site! I had a $40k SBA loan that went to default judgement. I asked the law firm representing the bank if the bank is willing to settle because all I have is about $10k to pay them for it (borrowed from family). Do I have any options at this point?
Hello
There is some great advice on here. I am also going through this right now. I sold my business and the bank released the lein on the equipment but now I still have this big SBA loan sitting on my sholders. We made an offer in compromise and the bank just came back to me and said it was denied. They are giving me more time to redue the offer but I think I need some more help on this. Who can I speak to regarding this? I prefer to not go to declare bankruptcy but it may come down to it.
There is much that can be done call norm at 413-584-2581 he will arrange a. Televinferance for us to discuss alternative strategies Don
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Bought 3 businesses in 2005.Closed 1 down this year.Other 2 are just ok.Owe 320k to the sba.Can I do a workout plan to pay back less as business has dropped alot in 2009 and not sure what will happen in 2010.Had to file for personal bankruptcy also.
Don,
Thanks for the insight. Chase is taking me to court for approx. $12,5K on a Line of Credit (initial line of $25K) issued to my business name, which was also personally gauranteed. Business is terrible here in Michiagn and I am in no position to pay Chase any more money. Court date is set for Monday, Aug 30, 2010.
Do I have any time to file an OIC with the SBA to get a reduction in the amount I owe?
I don’t want to pay anyone twice and from the sounds of it, I may pay Chase and then have to pay again to the SBA, if the attorney for the Chase secures a default judgement against me.
Also, Chase responded to my answer that I must have a licensed attorney represent my business in Circuit court. I have no extra cash to hire one. Is that going to be another issue for me too?
Again, thanks for your insight. I appreciate the information on the website. It’s very informative. Wish I had read it before i signed anything with the lender/SBA.
Frank,
I do not have enough info but here is what I can say, You always have time to submit an OIC but it takes many months to get a response, but it is a great reason for the judge to postpone, or the attorney likewise to postpone, however if the business is still operational then you have two issues both the business debt and the personal guaranty, if still operational you cannot shut down the process with a OIC first. Yo will not pay more then you owe, but both are obligated.It is a statutory issue, a corp must be represented by counsel yo cannot both represent the corp and yourself, you can represent yourself but not your corp.
Don,
Business is still currently legally in operation, as I have not advised my accountant or any attorney to disolve it yet and/or file for any bankruptcy protection.
Unfortunately, my last e-mail was incorrect and the court case was scheduled for Monday, August 23 not Aug 30th.
The Chase attorney filed saying I owe Chase 25K+ but the actual amount owed is currently 12.4K, as a payment was made on July 2, 2010 but was not noted in their filing. Their last filing was dated July 7th or 8th, five days after the payment was made. My August statemnet does show the payment being made.
When is the best possible time for me to contact your office, to speak to someone in person about my current situation?
Regards,
Frank
i just finished and am now out of the “tunnel of Horrors”. I made sure to have a personal and good relationship with the SBA workout officer at my bank. With this relationship i negotiated my workout and kept all my assets , my home, and my IRAs. I asked a lot of questions, paid money to attorneys that did nothing,and it took almost 2 years. This blog and website have been a great source of information and i thank you very much. I am now really familiar with this process and will begin to speak out about it as there is almost no information anywhere on how to do this and the bad side of these SBA loans.
Hello Don.
This site is very informative. Thanks. Below is my situation.
I had an SBA loan of 1.1m behind another bank (1m). Fell behind on the SBA pmts and had to signed a forebarence agreement which we later couldn’t cope up with and due to that a judgment was filed by the SBA lender. The SBA had and still have a lien on my residence and a judgment of course. The SBA lender forgave their portion with a 1099C (1.2m) which we reported as income. The SBA lender filed for bankruptcy and passed this on to the successor which later also filed for bankruptcy and is now with another successor. During this process the loan has been passed back to the Dept of Treasury which has given it to CBE to collect. While this was going on, someone bought the first note and foreclosed on us. So now there is not property and the SBA lien on the property was wiped out. Their lien on my residence is still existing and the judgment on my credit is still there.
Need a strategy on this. Please advice.
Thanks.
More Clarification.
When the loan was made for the business (hotel), a pledge to place a second lien my personal residence was made (big mistake). That’s what I have trying to get removed, and the judgment of course.
Thanks.
I had a small SBA backed loan ($20,000) 30 years ago that I ended up defaulting on and I filed personal bankrupcy. I now want to start a business that I have 21 years of successful experience in and I require about $700,000 in funding. Will I be able to apply for SBA backed funding or should I forget about SBA and approach other lending sources?
Mac,
I believe once defaulted you are unlikely to get another SBA loan, their computer does not forget such details… on the other hand 30 years is a long time…who knows.
I have defaulted SBA loan two years ago and property was sold on short sell and there is still some amount I owe as a personal guarantee. So what is the limitatation for the SBA to get judgement against me. The property was in Ohio. What do you suggest? Will they forgive the amount or what is the best way to know if they have forgiven that amount.
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Thank you!
It is unlikely you can negotiate the 1099, however debt forgiveness may not turn to ordinary income and thus be taxable for a variety of reasons, insolvency the main one. If insolvent at the time of forgiveness it does not convert to ordinary taxable income, see your tax preparer there are forms for this.
Its more complicated then that, in our estimate, if one wants the bst possible rtesults. There is the SBA offer in compromise forms the SBA financial forms and then appraisals etc. Ask your banker for th SBA workout forms it comes with the requirments. I will however say the difference between huge success and defeat are the additional forms one may want to use to demonstrate the borrowers condition as best as possible. As well as the ay the forms are filled out and the effort one can make to demonstrate low net worth.
There are many things that can be done to hasten the response and create closure, you have the basic components as best as i can tell from the limited information i have, you now need a full presentation to succeed. Call Norm and he will arrange a tele-conference for us to discuss your strategy. 413-584-2581
Yes you have only one option or you are going to pay twice. you already hurt your position by offering the bank $10,000. The offer needed to be made in an offer in compromise to the SBA…You need to undo this offer to the bank and then move onto the offer as stated above…call Norm at my office 413-584-2581…he will help you further…tell him i sent you.Don