SBA Loan Default Attorney

The SBA Offer in Compromise program allows eligible borrowers to settle their outstanding balance for less than the full amount owed. The SBA generally requires that all collateral be liquidated before an OIC is considered. Approval also requires demonstrated inability to pay the remaining balance and careful financial documentation.

The tax impact of that forgiveness is a separate problem. It surfaces after the settlement is complete. If the SBA forgives a portion of the debt, that amount may become taxable income under IRS Publication 4681. When cancellation-of-debt income intersects with existing tax issues, coordinated strategy matters. We evaluate tax debt relief options so one resolution does not create another crisis.

If your loan is still with the lender or in early-stage collections, an SBA loan workout attorney can negotiate modified terms, structured repayment, or a settlement before referring it to Treasury. This applies across SBA loan types, including 7(a), 504, and EIDL loans. PPP loan defaults follow a separate process and are evaluated individually. Acting before Treasury referral preserves more options. Once the matter escalates, flexibility often narrows. 

Once a loan transfers to Treasury for collection, the SBA no longer has authority to offer relief, reverse defaults, or negotiate payments. At that point, resolution is handled by the Treasury's Bureau of the Fiscal Service (BFS). Three options remain available depending on your financial position.

Treasury Repayment Agreement

The BFS can negotiate a structured repayment plan for borrowers who cannot pay the full balance immediately but have some capacity to make regular payments. The plan must reflect your actual financial situation, supported by documentation of income, expenses, and assets. Borrowers who attempt to negotiate these plans without representation are sometimes offered terms that create significant financial hardship. The BFS is not obligated to propose the most favorable arrangement your finances would support. 

Treasury Offer in Compromise

A BFS Offer in Compromise is a written settlement agreement with the Bureau of Fiscal Service for less than the full amount owed. It is generally based on demonstrated inability to repay the full balance within a reasonable time. The BFS uses the same formula as the original creditor agency to evaluate an acceptable settlement amount, and both lump-sum and deferred payment structures are available. This option requires the same thorough financial disclosure as the SBA-level OIC. A rejected offer can accelerate enforcement, so preparation matters. Treasury's collection tools after referral include wage garnishment up to 15% of disposable income, tax refund seizure, Social Security benefit offsets, and additional collection fees, all without a court order. 

Hardship Status

For borrowers with no realistic ability to pay, the BFS may suspend active enforcement and place the account in a non-collectible status while the hardship persists. The account gets flagged, and aggressive collection actions pause, but the debt remains. The BFS monitors for changes in financial circumstances, and a future tax refund, new employment, or asset acquisition can restart collection activity. This is a temporary administrative status, not a discharge.

Personal Guarantee Exposure

A personal guarantee for an SBA loan default puts your personal assets at risk. Business closures frequently trigger parallel IRS collections activity. The obligation does not end when the business does.

We approach personal guarantee enforcement and tax exposure together. That alignment reduces surprises and protects your long-term financial position.