FAQ

Each case stands on it’s own merits and is determined by a number of factors. It is impossible to generalize.  A free consultation is available to help you understand what your individual results may be.  

Depends on each case individually. Typically if we are involved early in the process and engage in a meaningful workout plan, there will likely not be a lawsuit.  We succeed at avoiding litigation constantly. However you must realize if you are not paying your debts the creditor has legal rights to sue you and there are no defenses to prevent them from doing so.  

You may choose to enter into bankruptcy but a bank on its own cannot force you to file for a bankruptcy. An involuntary bankruptcy petition is very rare and must be requested by more than one creditor.   

Some aspects of a commercial debt workout will, most will not. 

In the way an SBA loan is structured, the borrower is actually the business entity. You, the business owner are not a borrower on this loan; you are simply a guarantor in the event that the business fails.  A default on your business loan does not affect your personal credit and very often a business loan workout can be completed without any damage to your personal credit.

However, if the bank decides to sue you personally as the guarantor of the loan and the bank obtains a judgment against you, this will appear as a negative mark on your credit report.

If you engage in settlement discussions with your creditors on your personal guarantee, you may avoid a lawsuit or judgment, thus avoiding a negative credit reporting. 

There is no ceiling on yearly income for a debt workout. If you earn a considerable amount above your necessary expenses, this may be more difficult. The issue is net income after reasonable and necessary expenses such as rent/mortgage payments, auto expenses, utilities, food, gas, and medical. Irrespective of what your income may be, there is still a good chance you can workout your debt if you don’t live an extremely lavish lifestyle and are just making your monthly bill payments.

In some states your results will be even better due to protections against wage garnishment. In these states even if you are a very high earner creditors will not have access to garnishing your income and could potentially settle for less.  

401k accounts are completely protected across the nation. Any money in a 401k account or any other ERISA qualified plan falls under the same protections. In the case of other retirement accounts such as IRA accounts, 504 education accounts and any other form of retirement account protection is moderated at the state level and the state legislation varies significantly on this issue.  

Yes, they can and will if there is adequate equity available to them and no homestead law protecting your residence. Our strategies prevent such an outcome, but it is a real threat.

Homestead Protection laws are all state specific. Each state has its own requirements and amount of protection offered. Homestead protection is only for a principle place of residency and does not cover investment property and vacation homes.  

If you are the only guarantor on the loan the bank cannot pursue your spouse or anyone else for any defaulted debt. The bank is only authorized to pursue the borrower and the guarantors, in this case your business, and you, not your wife.

However in some states known as “Community Property States” there may be ways a creditor can access the assets of your spouse even if they did not sign the loan. These states are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. Each case is specific and you need a consultation with an expert to determine what will happen in these situations.  

No. Second Wind’s philosophy is that the legal system is not in our clients’ best interest and provides no benefit. Our clients are borrowers in default and this situation usually has no legal defenses. Our process is an alternative to the legal system and is a business workout, a negotiation, not a legally controlled process like bankruptcy. 

Many people think this is always a certainty when they experience debt forgiveness. You hear about this happening most often when a homeowner is foreclosed on and the shortfall gets forgiven. However, the Mortgage Debt Relief Act of 2007 has relieved homeowners who have been foreclosed on from this tax burden http://www.irs.gov/individuals/article/0,,id=179414,00.html.    

In the case of your business debt, the borrower is always the business entity; therefore it is also the business entity that experiences debt forgiveness. If you are organized under a “pass through” entity structure such as an LLC or an S-Corporation, if your entity experiences debt forgiveness, this will affect you personally. If you are organized as a C-corporation, you will not experience any effect. This is a general rule but you should consult with your CPA to see what the exact effect will be for your specific case.   

There are two things to understand about our fees. The first is the fact that we charge a fee based on a percentage of the debt reduced. In other words we have a financial motivation to do the best job possible. Further we amortize our fee, with no interest, over however long it takes to get the workout resolved. When necessary we even allow the client to pay us far after the workout is complete and the results are experienced. We determine a monthly payment that is affordable.

The SBA has one main standard by which they evaluate an acceptable offer in compromise.  “Is the amount being offered better than what the lending bank would obtain from the guarantors through forced collection means?” There are a number of ways to determine the acceptable amount to offer from here, but this is the general guideline. 

Yes. Having a judgment against you has no bearing. You can still submit on offer in compromise and be released of the debt with the right type of offer. If the offer is accepted the judgment will be marked satisfied.   

An SBA backed loan is written with the guarantors being jointly and severally liable. This means that anyone who signed the loan as either a borrower or a guarantor is responsible for the total outstanding balance regardless of any other guarantors or borrowers. Each guarantor is pursued individually. 

An SBA debt is written so all guarantors are jointly and severally held liable. If you are married the SBA prefers a joint offer in compromise, but in all other cases an offer is done individually for each guarantor. All guarantors do not have to participate in our program.

No. Once you default and workout an SBA loan, SBA guidelines state you may not obtain new SBA backed financing in the future. This policy could always change in the future.