A defaulted SBA loan makes you a lead. The moment your business closes or a UCC filing lapses, your inbox and voicemail start filling with people who “specialize in SBA debt,” and some of them are excellent, some are expensive middlemen, and some are predators. This page is the sorting mechanism. It recommends no firm and sells nothing; its job is to keep the demand-letter window, when you are most frightened and most solicited, from costing you twice.
The baseline fact every pitch has to be measured against
Everything SBA will actually do with your case is published. The process lives in SOP 50 57 4, the offer form is SBA Form 1150, the financial disclosure is Form 770, and both forms are free downloads from sba.gov. There is no priority line, no relationship desk, no insider channel. Under the SOP, your offer is evaluated one way: against what SBA and the lender could recover from you through enforced collection in a reasonable period. Anyone whose value proposition contradicts that (“we know people at SBA,” “we get everyone 15 cents on the dollar”) is describing a process that does not exist. Advertised settlement percentages are marketing; the SOP’s standard is your specific assets, income, exemptions, and litigation risk, and nothing else.
Paid help can still be worth every dollar. It just earns its fee inside the published process: building an accurate, defensible package, negotiating within the rules, and protecting you from mistakes. Here is who does which part.
Who actually does what
A workout attorney is the only one of the three who can stand between you and the consequences. Licensed and verifiable through the state bar, an attorney can negotiate with the lender and SBA on your behalf, advise on whether you even owe what is claimed, evaluate defenses before you sign them away, and defend you if collection becomes litigation. That last capability matters more than it appears: SOP 50 57 4 tells lenders to demand new consideration in workout agreements, including waiving defenses, releasing claims against the lender, and signing confessions of judgment, and it tells lenders to make a good-faith effort to negotiate over a lien on your personal residence before foreclosing it. Those are exactly the clauses and negotiations where unrepresented borrowers give away the most.
An OIC consultant (the industry also says “SBA debt specialist” or “loan resolution firm”) is typically a non-attorney preparer. The legitimate version assembles your Form 1150 and Form 770 package, organizes the financials, and manages the back-and-forth on document requests. What a consultant cannot do: give legal advice, represent you in litigation, or promise an outcome. And one warning specific to this niche: Form 1150 carries a declaration under 18 U.S.C. § 1001, with criminal penalties for false statements. A consultant who suggests making your finances look worse than they are is not aggressive, they are exposing you to a federal charge while their name appears nowhere on the form. The sworn signature is always yours.
A CPA handles the problem that arrives after the settlement: canceled debt is generally taxable income, and the insolvency exclusion on IRS Form 982 turns on a worksheet that should ideally be run before you accept an offer. That work is covered in the tax bill after an SBA settlement. If your situation involves a possible bankruptcy, the attorney and CPA questions converge and should be answered together.
How fees are structured
We are deliberately not printing dollar ranges here: workout pricing is not published in any verifiable source, and a made-up range would be exactly the kind of number this page exists to warn you about. The structures, however, are standard:
- Hourly billing against a retainer, common for attorneys, where the retainer is a deposit drawn down as work happens. Ask what the retainer covers and what happens to the unused balance.
- Flat fee per defined matter, such as preparing and negotiating one OIC package. The key word is defined: get the scope, and what counts as extra, in writing.
- Percentage of savings, charging a share of the difference between what you owed and what you settled for. Federal telemarketing rules explicitly contemplate this structure for debt relief services, but note what it does to incentives: the fee grows with the size of the claimed miracle, which is why this model and inflated promises so often travel together.
Whatever the structure, insist on a written engagement letter that names the humans doing the work, the scope, the fee mechanics, and the exit terms.
The advance-fee law most borrowers have never heard of
For-profit debt relief services sold by phone are covered by the FTC’s Telemarketing Sales Rule, and 16 CFR 310.4(a)(5) is unambiguous: they may not request or receive any fee until at least one of your debts has actually been renegotiated, settled, reduced, or otherwise altered under an executed agreement, and you have made at least one payment under it. The FTC’s consumer guidance compresses this into one sentence worth memorizing: “Only scammers will try to collect fees from you before they settle any of your debts” (or enroll you in a debt management plan, the sentence continues). Licensed attorneys charging retainers for defined legal work are a different, legitimate arrangement, which is precisely why the outfits to worry about are the ones that charge like a law firm while employing no lawyer you can look up.
The scam tells, specifically
Each of these is drawn from the FTC’s published warning signs or SBA’s own Office of Inspector General guidance, not from vibes:
- A guaranteed outcome. Guaranteed settlement of your debts, guaranteed percentages, guaranteed results from a “government debt relief program.” The FTC’s phrasing: only scammers guarantee.
- Enrollment before analysis. A firm that quotes you a settlement before reviewing your complete financial situation cannot be applying SBA’s actual standard, because the standard is your financial situation.
- Instructions to go silent. Being told to stop communicating with your lender or SBA without an explanation of the consequences is an FTC-listed tell, and in the SBA context the consequences are concrete: the 60-day windows and Treasury referral clocks keep running while you are dark.
- Government cosplay. Official-looking mailers, seals, or names engineered to read as an SBA program. Falsely posing as, or claiming affiliation with, a government agency is itself a federal violation (16 CFR Part 461). SBA’s OIG adds two clean verification rules: real SBA correspondence comes from addresses ending in @sba.gov, and SBA representatives never charge for help with applications or assistance (OIG states the rule for its disaster programs, and no legitimate SBA channel charges for help on any program).
- Fees for the form. Form 1150 and Form 770 are free. Paying someone to “unlock” or “file” them is paying for a download.
- Upfront payment for a promised approval. SBA’s OIG specifically warns against anyone promising loan approval or relief in exchange for payment up front.
When doing it yourself is reasonable
DIY is a sound choice when the stakes are contained: the business is closed, the collateral is gone, the deficiency is modest, your financial picture is simple and honestly documented, and nobody is threatening suit. In that case the work is careful paperwork, and free, competent help assembling it exists at your local Small Business Development Center (SBDC) and SCORE, the same no-cost counselors SBA’s own SOP points borrowers toward. Start with the OIC process guide and the default sequence so the package you build matches the standard it will be judged by.
Hire when the downside is not contained: a large personal guarantee exposure, a lien on your home entering the negotiation, litigation filed or threatened, workout paperwork containing waivers or a confession of judgment, a going-concern compromise with multiple creditors, or any fact you are tempted to leave out of Form 770. As a rule of thumb, the moment the documents start allocating legal rights rather than just describing your finances, you want an attorney who owes their duties to you.
This is not legal advice
It is the checklist for buying some safely. Verify any attorney with the state bar and any CPA with the state board of accountancy, get the engagement in writing, and treat every guarantee as an exit sign. This page stays deliberately neutral: no firm names, no referrals, no lead forms, because the point of it is that you should be able to judge any of them, including anyone we might ever mention, against the published rules.