So your business is closed, all the business assets have been liquidated, and all that remains is a fairly substantial pile of debt. Now what? One would think that the next logical step would be to submit an Offer In Compromise package (something this writer specializes in for clients) so the debt can be settled once and for all.
Not so fast. Here’s the thing:
For those not familiar with the process, the Offer In Compromise (OIC) must be submitted through the lender. When the lender submits the OIC to the SBA, the bank is asked whether they recommend that the offer be approved. In many cases, banks don’t want to settle, which means the OIC is dead in the water before it even makes it over to the SBA.
Why would a bank not want to settle? Perhaps they think a borrower was fraudulent. Or they think a borrower isn’t making a strong enough offer. Or they don’t want to bother with the paperwork necessary to submit the OIC to the SBA (this alone is great reason to have a workout professional prepare an OIC package, and deliver it on a silver platter to the bank). Some lenders simply have a “no settlement” policy for certain loan types or loan amounts. No matter that the reason, the bottom line is that the OIC is not something lenders are required to consider.
So how can a borrower improve their chances of their lender supporting an OIC?
It sounds simple, but many borrowers are elusive and hard to track down because they don’t want to deal with the stresses of talking to collections people. If you are intimidated by collections people, then find someone (like us) to represent you. Not only will a workout professional deal with the wrath of the collections people, they’ll make sure you don’t get steamrolled with unreasonable demands.
If you submit an OIC, make sure you are offering full disclosure in terms of your assets and your income. If you get caught leaving a major asset off your PFS (yes, there are ways to check), your chances of having a settlement accepted will fall dramatically.
Another way to help your chances of having an OIC accepted is to fully cooperate in the liquidation of your business assets. Simple things like providing access for appraisers and returning phone calls to schedule appraisals can help you tremendously in the long run. In short, when you make your lenders life easy, there’s a chance they’ll return the favor when its OIC time.