SBA Default: Is an OIC required for your SBA lender to release a lien on your home?

In a word: sometimes.  There are cases when an OIC is required, and times when an OIC is not needed.  So what does it depend on?  In most cases, it depends on whether or not you are personally liable to the SBA loan.

When An OIC Is Required

If you had a business that closed, and all the assets have been liquidated, you should in theory be eligible for an OIC (some other conditions must be present).  If you signed a personal guarantee and want to be released from that guarantee, the SBA requires that you submit an OIC, which requires full financial disclosure.  If you pledged your home as collateral for your SBA loan, then you would ask for the lien release as part of an Offer In Compromise. In this case, the OIC is required because are still personally liable for the loan, therefore how strong or weak you are financially does matter.

When An OIC Is Not Required

If you did not personally guarantee your SBA loan (highly unlikely), or if you filed for Chapter 7 personal bankruptcy (much more common) and were discharged, then you are not personally responsible for repayment of the SBA loan.  That said, a bankruptcy discharge does NOT result in the release of liens on real estate.  The only way for a lien release to happen is for the lender to agree to a lien release.

Most lenders will agree to consider a lien release, but in a case when you are not personally liable, your lender should not be requiring you to submit an OIC (and the associated paperwork).  Why?  Since you are not personally liable, your personal financial situation should not matter.  All that should matter is how much equity is in the home.  The lender should be making a business decision: is the offer you are making in exchange for the lien release going to result in the same amount of cash that they would expect in a foreclosure scenario?

Distressed Loan Advisors ( offers expert advice about dealing with SBA Loan Default, and can be reached at 1-877-436-4533 or