The answer to this question is complicated. Is determined by several factors, as described in I, caused
Background: When a borrower who obtained a bank loan guaranteed by the SBA is in default, the borrower more .. the other has the option of filing a Chapter 7 bankruptcy (assuming the debtor has the right to ask. contribution) to protect. However, the SBA (and the Bank as administrator of the SBA), the possibility that the borrower is not an offer in compromise (OIC), rather than file Chapter 7 bankruptcy. The borrower must be aware that the OIC is a privilege and not a right, and the SBA has no obligation to accept any order, and only if the SBA will consider a good deal, and twist it no fraud, concealment or . How SBA notes that it is often difficult to understand and feels like black magic and a lot depends on the person who appears in the file. However, there are guidelines SBA SOP. According to the SBA SOP OIC
“The commitment must be proportional to the amount that could be recovered within a reasonable period of escape routes and should be sufficient to protect the integrity of the program, the SBA loan.”
So what does this mean? In short, the service is acceptable revival of eight (8) sets out general criteria:
The size of the deficit is an obvious factor in determining the “Agreement.” But even if one believes that the “look” a certain percentage of the SBA to accept 20% of SBA recovery, there is really no magic. This is due to the borrower if the amount of $ 150,000 or $ 1,500,000 in combination with other criteria is logical – that is, the borrower can really afford? What alternatives are there to the borrower?
The liquidation value of the debtor, the debtor protection under Chapter 7 bankruptcy (BK) must seek
This is an obvious alternative to ITO for the borrower. It is a calculation to do, and that is very important for the Bank and / or SBA. In cases where the borrower has a limited presentation BK effects of exposure, such as emergency SBA … but the borrower must be aware that, even if they are not responsible fully discharged for the presentation of BK and personal guarantee, SBA a significant and substantial amount of money from the OIC demands based on the value of the net assets and its ability to pay.
Assets if the borrower fails to protect BK.
Many debtors, that the idea of ”free” when it comes SBA decree. There must be a mistake. Although the IRA and 401K “liberated” the examination of an application BK placed these assets in testing a decree SBA. Why? OIC is a privilege … Therefore, in many cases, SBA officials feel that the borrower will have to use their assets – including exemptions – show good faith to the ICO.
SBA must restore the seizure of more than five (5) years of lead
In addition, guarantee the purchasing power of the SBA. We recently spoke with a lawyer of great power, which was in violation of ~ $ 600,000. The SBA has requested $ 300,000 from him, although BK provided its comments under $ 30,000. Why? Earn $ 250,000 or more per year. They thought that if your wages garnished (they could do if you had no BK) is estimated at $ 300,000 over five years. The borrower has filed BK – in this case, the SBA has guessed wrong.
The borrower to avoid bankruptcy
This calculation is fuzzy, but I advise my clients that filing a BK has a “hidden” costs. Present in the business world becomes more complicated if the borrower files for BK, and these complications can cost real money in 10 years BK has reported on a credit report. I think the cost between $ 75,000 – $ 125,000. In other words, if the borrower to repay the principal of the OIC for less, then it is a good idea to solve. However, if the liquidation costs are higher, as in the case of the lawyer I mentioned above, see the borrower shelter BK.
Structure of the Offer
Many borrowers wonder whether structuring a payment plan for your OIC. The simple answer is yes, but … be ready this amount, the SBA must under a higher pension payments, if the borrower use a complete design package. The reason is simple: Many borrowers in default of the provisions of these plans. The SBA understands this, then there is not much money to be able to create the “risk” refers increase to reflect on a payment.
Other health factors, age and unusual circumstances
The ASB believes that the “other” factors such as age, health, etc. For example, if a borrower is 65 years old, the hidden cost of a large BK, since the value of a credit report is up to you, the most people are approaching retirement age. Also affect major health problems. Borrower in exchange for ACC ASB other factors that SBA as a sick child, a divorce or a sudden job loss can affect.
It sounds trite, but the SBA and the bank in question are large and relatively inefficient administrative units. Therefore, efforts have been worked, and turn the wheel of progress and the treatment made a decree which in turn provides enough to arouse his curiosity. For a borrower without exposure BK, there are alternatives, and no lien on the property, this figure is relatively modest … perhaps as low as $ 10,000 – $ 15,000. If there is a lien on the property, the business, the bank has the funds for these privileges removed (attorney’s fees) to the cost of an additional $ 10,000 or more to eliminate expenses.
Finally, the cost for the cancellation of the OIC try to determine if the borrower is a year of many factors and criteria. And there is a simple answer – each situation is different and unique.