More and more offer in compromises are structured

A new trend I’ve noticed lately with the SBA and the banks that service the defaulted notes is their willingness to accept a structured term settlement over time. This challenges the traditional belief that the SBA will only take a lump sum payoff – something I’ve even heard from bankers recently.

The bottom line is that the banks typically understand what a “judgment-proof” debtor is – one whose liabilities exceeds their assets. In such a case, the bank’s pursuit of the borrower hits a dead end rather quickly. At that point in time, it becomes clear that the bank is in a disadvantageous position to settle. The leverage therein lies with the borrower.