Treasury Offset Program (TOP) and SBA EIDL Loans

Treasury Offset Program (TOP) and SBA EIDL Loans

Many clients have contacted our office to report that their delinquent SBA EIDL loans have been transferred to the Treasury Offset Program (TOP), and a 30% penalty has been added to their loan balance.

The purpose of this Blog post is to discuss the Treasury Offset Program (TOP).   

The Treasury Offset Program (TOP)  is operated by the Department of the Treasury’s Bureau of the Fiscal Service and it is a federal agency that was created to help the Government collect debts from individuals and businesses that owe money to the Government. 

When a debt owed to the Government is past due, TOP assists in collecting the debt by withholding funds due from the Government to the delinquent borrower. This process is known as "offsetting the payment" or "administrative offset."

Examples of offset include the government withholding a tax refund due to a taxpayer who owes money to the government, garnishing 15% of a taxpayer's Social Security payment, or not paying money owed to a government vendor who defaulted on an SBA loan.

When a defaulted SBA loan is transferred from the SBA to TOP, a 30% penalty is added to the loan balance and TOP will notify credit reporting agencies of the referral. 

A borrower may try and have the Defaulted SBA loan “recalled” from TOP to the SBA, but in our experience that is hard to do

What are a borrower's options when a loan has been referred to TOP?

They can pay the full amount owed (including the 30% penalty). 

They can submit an Offer in Compromise to TOP

They can file for Bankruptcy to stay TOP’s collection efforts and discharge the loan balance or

Do nothing

The basis for filing an offer in compromise is Federal Regulation 31 CFR § 902.2 - Bases for compromise. That regulation provides that (a) Agencies may compromise a debt if the Government cannot collect the full amount because:  (1) The debtor is unable to pay the full amount in a reasonable time, as verified through credit reports or other financial information; (2) The Government is unable to collect the debt in full within a reasonable time by enforced collection proceedings; (3) The cost of collecting the debt does not justify the enforced collection of the full amount; or (4) There is significant doubt concerning the Government's ability to prove its case in court.

Factors that will be considered in accepting an offer in compromise are 

Ability to Pay: TOP assesses the taxpayer's income, expenses, asset equity, and overall financial situation to determine their ability to pay the full amount owed.

Income and Expense Analysis: A detailed analysis of the taxpayer's income sources, monthly living expenses, and discretionary spending is conducted to evaluate their financial circumstances.

Asset Equity: TOP reviews the taxpayer's equity in assets, such as real estate, vehicles, investments, and other valuable items, as potential sources of payment.

Future Income Potential: The borrowers earning potential are taken into account to estimate their ability to pay the debt in the future.

History: The borrower's  attempts to pay or resolve the debt, are evaluated.

Special Circumstances: Exceptional circumstances or other hardships, may be considered when evaluating an OIC.

Collectability: TOP reviews the likelihood of collecting the full amount owed.

Tax Administration: An OIC may be accepted if it would promote future compliance or resolving economic hardship.

Client’s or advisors who have defaulted SBA loans that have been transferred to TOP should contact Jim Shenwick, Esq.

Jim Shenwick, Esq  917 363 3391  jshenwick@gmail.com 

Please click the link to schedule a telephone call with me.

https://calendly.com/james-shenwick/15min

We held individuals & businesses with too much debt!

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Prior Blog Posts about SBA EIDL Loans by Jim Shenwick, Esq

U.S. Seeks to Collect on Up to $20 Billion in Delinquent Covid Loans

https://shenwick.blogspot.com/2024/03/us-seeks-to-collect-on-up-to-20-billion.html

SBA EIDL Loan Charge Offs

https://shenwick.blogspot.com/2024/02/sba-eidl-loan-charge-offs.html

SBA EIDL LOANS & CIVIL & CRIMINAL PENALTIES & BANKRUPTCY FILINGS

https://shenwick.blogspot.com/2024/01/sba-eidl-loans-civil-criminal-penalties.html

Defaulted SBA EIDL Loans: In Reversal, U.S. to Heighten Efforts to Collect Billions in Unpaid Covid Loans

https://shenwick.blogspot.com/2023/12/defaulted-sba-eidl-loans-in-reversal-us.html

SBA EIDL Loan Defaults and the Statute of Limitations 12-24-2023

https://shenwick.blogspot.com/2023/12/sba-eidl-loan-defaults-and-statute-of.html

SBA EIDL Penalties if an SBA EIDL Loan is Not Repaid

https://shenwick.blogspot.com/2023/12/sba-eidl-penalties-if-sba-eidl-loan-is.html

Misuse or Misapply SBA EIDL Loan Proceeds and Chapter 7 Bankruptcy Filings

https://shenwick.blogspot.com/2023/08/misuse-or-misapply-sba-eidl-loan.html

SBA EIDL HARDSHIP PROGRAM

https://shenwick.blogspot.com/2023/07/sba-eidl-hardship-program.html

Defaulted SBA EIDL Loans, Limited Liability Company (LLC) and Cancellation of Debt Income (COD) under Section 108 of the Internal Revenue Code

https://shenwick.blogspot.com/2023/07/defaulted-sba-eidl-loans-limited.html

Offers In Compromise ("OIC") for Defaulted SBA EIDL loans and Section 108 of the Internal Revenue Code ("IRC"), Relief of Indebted Income, a Trap for the Unwary!

https://shenwick.blogspot.com/2023/05/offers-in-compromise-oic-for-defaulted.html

EIDL LOAN WORKOUTS AND BANKRUPTCY    https://shenwick.blogspot.com/2022/07/eidl-loan-workouts-and-bankruptcy.html

EIDL Loan Default Questions & Answers

https://shenwick.blogspot.com/2022/10/eidl-loan-default-questions-answers.html

EIDL LOAN DEFAULT DOCUMENT REVIEW, WORKOUT, BANKRUPTCY FILING & OFFER IN COMPROMISE

https://shenwick.blogspot.com/2022/07/eidl-loan-default-document-review.html

EIDL Defaulted Loans

https://shenwick.blogspot.com/2022/07/eidl-defaulted-loans.html

New Relief Program for SBA EIDL Borrowers Who are Having Difficulty Repaying EIDL Loans " Hardship Accommodation Plan"

https://shenwick.blogspot.com/2023/05/new-relief-program-for-sba-eidl.html

EIDL LOANS and SBA OFFER IN COMPROMISE PROGRAM

https://shenwick.blogspot.com/2022/07/eidl-loans-and-sba-offer-in-compromise.html

PPP & EIDL Fraud

https://shenwick.blogspot.com/2022/08/ppp-eidl-fraud.html

Better to connect-What small business owners need to know about repaying loans tied to pandemic relief from the SBA EIDL Loans

https://shenwick.blogspot.com/2022/11/better-to-connect-what-small-business.html