It makes little sense, since the SBA has a defined Offer in Compromise program; We initiate it frequently and resolve delinquent loans very effectively. There are procedures, guidelines, requirements, and a resolution process. It works. It is often difficult to navigate, cumbersome to use, but because we understand the process well and have a lot of practice with it, and we are very successful with it, we did it.
Not so with Katrina disaster loans or other disaster loans that are in default.
For whatever reason, they haven’t received the memo. They don’t know about an Offer in Compromise process and act like they’re not SBA-guaranteed loans. They cannot be resolved. We know that we have tried repeatedly and got nowhere.
Apparently, the SBA has determined in its own infinite wisdom that there is a significant difference between directly lending money from Congress to support disaster situations and loan guarantees made through traditional banks. For some reason, this difference is sufficient for an Offer in Compromise procedure to exist for guaranteed loan issues through banks and direct loan issues directly from the SBA.
Why is there a difference, I don’t know. I can’t even understand the logic behind such a demarcation, but there is.
A defaulted disaster loan goes directly to the United States Department of Justice, Treasury and is handled by an Assistant United States Attorney and prosecuted as if defaulting was a crime.
Now, in fact, we have taken the defense of such a situation through the Federal District Court system and have litigated it before a Federal District Judge and have achieved a great pardon, our typical pardon of 90% on a loan of $ $ 1.2 million, however, the sad part of this is the huge legal fee that borrowers had to pay for such justice. It took years and a small fortune for legal fees that could have been used to reduce debt, but instead they were used to prove that the borrowers were bankrupt and out of work and unable to pay a penny more. In fact, the payment was structured over several years.
Imagine the scene, your home and business razed, your entire community gone, and the SBA is on site working from a mobile office, offering cash on the spot to rebuild. The reconstruction did not go well, the business or the market did not recover and the income has apparently disappeared forever, and then the second disaster occurs, the SBA has been collecting its recovery and, although the borrower never recovered from the disaster, it lost everything that I had. , the United States Treasury is going to collect no matter what.
Despite the facts and despite the reality that the SBA has a debt forgiveness plan, disaster loans are not included in this process. Let’s hit the borrowers again, the SBA says, we charge no matter what … and so they do … no matter what, and until I get to the US District Court, there are no exercises. available. We know. We are defending a handful and we are not winning. We are losing.