Department of Treasury debt collection - SBA Loan Default
by RyanBridgeMgt, Window Shopper
- Created: October 9, 2013, 11:35 am
- Updated: November 3, 2014, 12:52 pm
When a business owner defaults on a business loan that was taken from a bank which was secured by a SBA guarantee, there are certain procedures that happen during a default situation. Initially the banker will attempt to pursue the borrower to collect the debt. Once the bank deems that the debt is not collectable, they will file a claim with the SBA for a percentage of the loan guarantee and the bank is now out of the picture. The SBA will then send a 60 day demand notice to all guarantors on the loan as part of the personal guarantee associated with the loan documents. That 60 day demand notice will advise the borrower to either pay balance in full or present that office with proper documentation for the potential to get an "Offer in Compromise" submitted and accepted to settle for less than the full balance either in a lump sum payment or a payment plan. Most people just simply ignore the letter because they are still in a state of shock or depression that their business has failed and they are struggling to find the next step. There is also a good amount of people who send in the paperwork late or very insufficient to the SBA standards. If the SBA feels like the offer is simply to low, incomplete, or ignored they simply turn the file over to U.S Treasury to attempt to collect their debt. The Treasury uses 5 different collection agencies to collect these debts which adds a hefty 28% addition to the amount. It seems that I get phone calls and emails every day in the last few months from defaulted loans in the Treasury Department. The outcome is much more harsh for the defaulted borrower if the SBA passes the file down to the US Department of Treasury. They almost force you into bankruptcy by threatening wage garnishment and unreasonable settlements and payments plans. The D.O.T does have a procedure for settlements and the documentation is similar to the SBA forms. I highly recommend speaking with a firm that has experience dealing with SBA defaults or the Department of Treasury. I am always more than happy to take phone calls or emails from anybody needing advice on submitting or preparing an Offer in Compromise. Ryan Lineham - Bridge Management Consulting - Ryan@BridgeMgt.com
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