Offer In Compromise, SBA Guaranteed Loans. What’s It All About?

Offer in Compromise, or OIC, is an SBA program designed to support a request for debt forgiveness. Hallelujah!

This is the only answer to the recessionary pressure that has caused severely depressed revenues and increased overhead, resulting in defaulted note payments as there is not enough cash to support it all. If not for this OIC opportunity, all that remains is foreclosure, liquidation by auction and eventually, personal bankruptcy.

Many bankers don’t tell you about the OIC, preferring to just slowly liquidate you until there is nothing left. The OIC is real and it is a very important strategy that can work wonders if properly utilized, effectively reducing debt and freeing you to move on unhindered, without bankruptcy. The problem is, as with so many government bureaucracies (and we must never forget that the SBA is a government bureaucracy and has its own issues, standards and procedures) there are many unknowns, sometimes making it very hard to deal with.

There is a presumption against granting forgiveness. The SBA Offer in Compromise is, however, designed for the specific purpose of overcoming the presumption by allowing the defaulting borrower an opportunity to provide adequate financial information indicating and supporting that debt forgiveness is warranted and in every one’s best interest. It is about demonstrating your changed circumstances.

Unfortunately, if left just to the two-page form, it is our belief that the people responsible for reviewing and deciding are not given adequate information to make the correct decision and thus, unjust results occur. Many times a rejection, or a rejection with a counter offer that is many times greater than what was offered and way out of the realm of possibility, is the response. Thus the program is frustrating and, in many cases, a total failure although its intent is good. Other than the form itself, there is no guidance, no direction, no guidelines, no support available of any kind, from any source, and a defaulting borrower is left to his own imagination of what to do, how to do it and what to offer.

A recent example to illustrate this problem: We had a client who previously made an offer of $450,000 on a $900,000 defaulted loan, prepared by his attorney, only to be rejected to every one’s shock, including his bank’s, his lawyer’s and his own. We reviewed the situation and within moments we knew why his application failed. The lawyer, while doing his best, had no idea how the process really works and failed to satisfy the requirements of the process. Therefore, the offer failed, not because the number was wrong but because he failed to follow the protocol required to succeed. We then offered $50,000 and it was accepted!! Sounds crazy perhaps, but it is the truth and we have many more similar stories. We understand that the process is as important, or even more important, than the offer amount itself. Get it right and succeed, get it wrong and fail.

Call 413-584-2581 for help. We will gladly help support your efforts. Norm will arrange a no-obligation teleconference to discuss your issues.

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