How to Defend Against an Administrative Wage Garnishment Notice
If you've been served an administrative wage garnishment notice, you need to know how to defend yourself. Read on to learn the best defenses.
Contact Our SBA Attorneys for Nationwide Representation of SBA and Treasury Debt Problems
Book a Consultation CallIf you have recently received a letter from Treasury’s Bureau of Fiscal Service (BFS) demanding that you pay off an SBA debt or other Federal Agency Creditor non-tax debt where the Government has added an amount up to 30% of the original balance as “administrative fees and costs,” you should consider exercising your statutory rights as codified in the Debt Collection Improvement Act (DCIA) of 1996. Do not ignore this important letter. You will need to act quickly before Treasury begins to utilize their administrative collection weapons against you.
Sometimes, based on your financial status, a compromise or settlement with Treasury’s BFS won’t be a viable option. Some federal debtors have too much in liquid assets and/or their monthly income is too high such that the Treasury’s BFS will not be amenable to accepting your compromise or settlement offer.
If your financial profile and net worth disqualifies you for a compromise, one of your options is to negotiate a repayment agreement with the Treasury’s BFS. After carefully reviewing your financial situation, we can negotiate a reasonable repayment agreement with the Treasury’s BFS.
A repayment agreement with the Treasury’s BFS is used to pay the claimed debt over a reasonable period of time. However, the Treasury’s BFS unilaterally defines a “reasonable period of time” as no more than 3 years. It, however, does not take into consideration certain factors as noted in the DCIA of 1996, the supporting Code of Federal Regulations (CFR) or the Federal Claims Collection Standards (FCCS) to derive the monthly amount. Instead, it just calculates the monthly amount by dividing the unverified amount of the alleged federal non-tax debt by 36 months.
It is a one-sided negotiation that favors the Treasury’s BFS. Don’t fall into the trap by trying to negotiate the repayment agreement terms by yourself. Instead, let us analyze your financial profile and compare it against the FCCS to derive a “reasonable” amount that you can afford and present the terms to the Treasury’s BFS to arrive at a “win-win” negotiation that works for both parties.
Contact us today for a Case Evaluation.
Clients obtained an SBA 7(a) loan for their small business in the amount of $298,000. They pledged their primary residence and personal guarantees as direct collateral for the loan. The business failed, the lender was paid the 7(a) guaranty money and the debt was assigned to the SBA. Clients received the Official 60-Day Notice giving them a couple of options to resolve the debt balance directly with the SBA before referral to Treasury's Bureau of Fiscal Service. The risk of referral to Treasury would add nearly $95,000 to the SBA principal loan balance. With the default interest rate at 7.5%, the amount of money to pay toward interest was projected at $198,600. Clients hired the Firm with only 4 days left to respond to the 60-Day due process notice. Because the clients were not eligible for an Offer in Compromise (OIC) due to the significant equity in their home and the SBA lien encumbering it, the Firm Attorneys proposed a Structured Workout to resolve the SBA debt. After back and forth negotiations, the SBA Loan Specialist assigned to the case approved the Workout terms which prevented potential foreclosure of their home, but also saved the clients approximately $294,000 over the agreed-upon Workout term with a waiver of all contractual and statutory administrative fees, collection costs, penalties, and interest.
Our firm successfully resolved an SBA 7(a) loan default in the amount of $212,000 on behalf of an individual guarantor. The borrower’s business experienced a significant downturn in revenue and was unable to sustain operations, ultimately leading to closure and a remaining personal guaranty obligation.
After conducting a thorough financial review and preparing a comprehensive SBA Offer in Compromise (SBA OIC) submission, we negotiated directly with the SBA and lender to achieve a settlement of $50,000—approximately 24% of the outstanding balance. This favorable resolution released the guarantor from further personal liability and provided the opportunity to move forward free from the burden of enforced collection.
Client’s small business obtained an SBA 7(a) loan for $750,000. She and her husband signed personal guarantees exposing all of their non-exempt income and assets. With just 18 months left on the maturity date and payment on the remaining balance, the Great Recession of 2008 hit, which ultimately caused the business to fail and default on the loan terms. The 7(a) lender accelerated and sent a demand for full payment of the remaining loan balance. The SBA lender’s note allowed for a default interest rate of about 7% per year. In response to the lender's aggressive collection action, Client's husband filed for Chapter 7 bankruptcy in an attempt to protect against their personal assets. However, his bankruptcy discharge did not relieve the Client's personal guarantee liability for the SBA debt. The SBA lender opted to pursue the SBA 7(a) Guaranty and subsequently assigned the loan and the right to enforce collection against the Client to the SBA. The Client then received the SBA Official 60-Day Notice. After conducting a Case Evaluation with her, she then hired the Firm to respond and negotiate on her behalf with just 34 days left before the impending referral to Treasury. The Client wanted to dispute the SBA’s alleged debt balance as stated in the 60-Day Notice by claiming the 7(a) lender failed to liquidate business collateral in a commercially reasonable manner - which if done properly - proceeds would have paid back the entire debt balance. However, due to time constraints, waivers contained in the SBA loan instruments, including the fact the Client was not able to inspect the SBA's records for investigation purposes before the remaining deadline, Client agreed to submit a Structured Workout for the alleged balance in response to the Official 60-Day Notice as she was not eligible for an Offer in Compromise (OIC) because of equity in non-exempt income and assets. After back and forth negotiations, the SBA Loan Specialist approved the Workout proposal, reducing the Client's purported liability by nearly $142,142.27 in accrued interest, and statutory collection fees. Without the Firm's intervention and subsequent approval of the Workout proposal, the Client's debt amount (with accrued interest, Treasury's statutory collection fee and Treasury's interest based on the Current Value of Funds Rate (CVFR) would have been nearly $291,030.
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