Expert: Christine Janklow - 8/21/2009

Question
QUESTION: I read in one of your answers about a offer and compromise settlement, what is that?

My business is secured with an SBA loan, personal guarantee. I am going to have to close my business as I can't pay the rent. I am current on all my other bills, loans, home mortgage etc. How can the SBA take my home if I am current on my payments for the 1st and 2nd leinholders? I can't file bankruptcy, it doesn't eliminate my debt other than CC. I have NO income, as I have not been able to pay myself. BK you have to show income to repay or continue to pay on existing home....Everyone advises me to exit asap. Obviously my credit is RUINED after this, which I had an 816 score until now. Any advice?

ANSWER: Cheri:
Thank you for your inquiry. I regret your business is not doing well enough presently. You like many business owners are between a rock and hardplace, knowing that you have bet the farm and have no means to repay what you owe. May I suggest, to first begin by getting down to visit a counselor at your local SBA office, to see what if any remedies exist for your loan (i.e. forbearance, debt forgiveness,etc.), then go to your landlord and ask them if they can work with you on the rent so they don't loose you as a tenant. If no other means of relief are offered than you need to look for an exist strategy on your loans, and try to gain some way to earn money so you can provide for yourself. As for your home, you might want to consult with a real estate specialist or attorney that can provide better insight to the liens. It is unlikely if your value is insufficient that a 3rd lienholder could get any repayment by foreclosing, so understanding what your options are is first order. At this point, gather all the information you need to dissolve your company properly - you can check out sites like LegalZoom.com as they provide corporate dissolution at a good price.

I hope this helps, and if so, please take a moment to provide a positive rating so others can benefit from this answer.

Respectfully,

Christine Janklow

---------- FOLLOW-UP ----------

QUESTION: Thank you Christine, I did sit with a SCORE counselor and they gave me the name of the SBA specialist in my area that I will contact Monday. I have tried for 6 months (as many of the tenants have) to work with the landlord (DDR) for rent relief. They will NOT work with any tenants in here and consequently 5 stores are at risk of closing this year. DDR is very unwilling to work with anyone, they don't care, they tell you "file bankruptcy if that's what you need to do". We don't understand why they will not work with all of us. If we close the shopping center will virtually be 80% vacant!!

The 3rd lein holder is the SBA loan, if my house sold they would get about 75% of the loan value, and hope they would forgive the balance. But they would have to release the lein in order for me to sell the house as a short sell.

Thank you again for your assistance.

Answer
Cheri:
It seems that you have spent considerable time trying to gain some concessions, and for the most part you go about it well. As for the landlord, generally speaking most don't take tenants seriously until they are 30 days or more late. This is risky but if one is faced with exiting a business might be what is needed to get their full attention. However, one must be ready to respond with money to  either compromise or cure the situation after negotiations are concluded. I hope everything works out well with the SBA, please feel free to follow up with the results, I am sure my readers would be interested. Good luck.

Respectfully,
Christine Janklow