Key Elements Of An SBA Loan Default Offer In Compromise

Key Elements Of An SBA Loan Default Offer In Compromise

If you are struggling in paying an SBA loan, you do not have to struggle alone.  If you have found that you are at a risk of SBA loan default, one of the best thing you can do is to seek assistance. You may find it difficult to determine what action to take. However, when you react quickly and in an effective way, this will go a long way in getting an offer in compromise. If you do not address the problem, on the other hand, this will only cause more problems down the road and lead to additional costs and fees. The goal of this article is to guide you through the 3 main elements that are necessary for an effective SBA offer in compromise strategy.

Defining the SBA offer in compromise

This is a payment in part of the SBA loan after which the loan is considered fully paid. This means that you will not be at a risk of the debtor demanding payment from you. In order for compromise on the debt that is owned by the SBA, there are certain conditions that need to be met.

  • The loan should be classified as if it is in liquidation status
  • You should not be in bankruptcy when making the offer
  • It is impossible to pay the full amount for certain reasons such as:
  1.  The debt being unable to pay the loan in a reasonable time
  2. It is not possible to collect the loan using enforceable methods in a considerable time period
  3.  The collection cost is higher than the loan
  4. There is a risk for litigation
  5. There are special circumstances of the debtor such as illness and making the payment will result in financial difficulties
  6. There is no valid legal defense that bars the collection of the loan
  7. There is no misrepresentation or  fraud on the part of the debtor
  8. The compromise amount is reasonable as compared to the amount that would have been collected

You will need to show that it is not possible to pay the entire amount in a considerable period of time. In most cases, the higher the debt is, the less your chance of paying the entire amount of debt. You can seek the help of an SBA attorney in showing that it is not possible to pay the debt in a reasonable time period and why the best recovery of your SBA loan is an  SBA offer in compromise program. Some of the issues that can be addressed by the SBA attorney include determining the value of your l estate for the sake of the offer in compromise.

Show litigative risk

You will need to show an offer in compromise strategy that shows that there is quite a significant litigative risk. This means that there is doubt of prevailing in court as a result of a legal issue. The issue of litigative risks is well addressed by an attorney. The lawyer can get an SBA loan file from the SBA and carefully analyze the documents. Could there be a problem with the guarantors? Is the SBA seeking the right amount? Was the due process followed? All these issues will provide a litigative risk that can provide a good ground for an offer in compromise.

Showing the offer in compromise is the better recovery procedure

You will need to show the SBA that it is possible to recover more. Therefore, you need to ensure that the SBA offer in compromise shows that settlement amount is a better deal that what the SBA will collect if they choose to follow up on the loan.