SBA SOP 50 51 3- Classifying Loans in Liquidation
Blog article by expert SBA workout attorneys from Protect Law Group, APC regarding SBA loans classified in liquidation status and how lenders begin the process
Do you want to know more about how to stop an administrative wage garnishment but don't know where to start? Learn more here.
Book a Consultation CallThe impact of the pandemic has not been limited to our mental and physical health, but also our financial wellbeing. According to this CNBC news report, the average American now has an individual debt of about $92,727. It is safe to say that there are a significant number of creditors out there awaiting payments that are long overdue.
This could have various implications on individuals as well as businesses alike. In circumstances like these, it is not uncommon, but often surprising to receive an administrative wage garnishment if you have defaulted on an SBA loan.
This article explores the nature of these legal procedures and what you, as a debtor, small business, or employer can do to challenge these wage garnishments.
Let's get started by examining the definition of this procedure, first.
Administrative wage garnishment is a legal procedure. Here, a percentage of an individual's earnings is withheld and used to clear debts owed to the federal government.
Unlike wage garnishments issued for a private creditor, the federal government does not have to file suit and obtain a judgement before initiating an administrative wage garnishment.
For example, if you are in default of your and are employed, you may receive an administrative wage garnishment.
You can stop or challenge an administrative wage garnishment when:
There is an exemption for those who have been employed for less than twelve months after losing their previous job. Further, you also get a notice of the administrative wage garnishment and the opportunity for a hearing before the garnishment order can issue.
You can request a hearing to challenge the order on or before the end of this notice period to avoid wage garnishment. However, if you challenge the order after this time period the employer may continue to withhold the amount specified from your wages until a decision has been made.
You can find yourself in one of two situations:
In the first instance, you must provide evidence that demonstrates why you do not owe a debt to the creditor. Depending on your circumstances, you may have already cleared this debt, you may have been released from debt or it could be an administrative error.
In the second instance, you may have to establish that you've already cleared part of the amount. Alternatively, part of your collateral may have been sold to reduce the amount owed. Whatever your reasons are, make sure to provide records, receipts, and other evidence to prove that there has been an error on the part of the issuing authorities.
You may also challenge an administrative wage garnishment if it would be a cause of financial hardship to you. To prove this you need to submit a personal financial statement to support your claim.
In a nutshell, you must be able to demonstrate that if your employer were to follow through on the wage garnishment, you would not be able to meet your basic needs. This could include food, utilities, housing, transportation for work, medical care, and other essentials relevant to your daily needs.
Do keep in mind that you cannot use private school tuition or housing cost in excess of the average rent as a daily expense.
An administrative wage garnishment causes you and your business financial hardships and come at unfortunate moments. However, there is plenty you can do to stay afloat and challenge these orders.
Are you a business owner struggling to pay off a federal loan that exceeds $30,000? Do you have trouble managing an administrative wage garnishment? Our team of qualified SBA attorneys can help.
We provide legal assistance and representation to personal guarantors, federal debtors, and small business owners across the nation. Contact us to get helpful information and expert advice on your next course of action. Get in touch today.
Millions of Dollars in SBA Debts Resolved via Offer in Compromise and Negotiated Repayment Agreements without our Clients filing for Bankruptcy or Facing Home Foreclosure
Millions of Dollars in Treasury Debts Defended Against via AWG Hearings, Treasury Offset Program Resolution, Cross-servicing Disputes, Private Collection Agency Representation, Compromise Offers and Negotiated Repayment Agreements
Our Attorneys are Authorized by the Agency Practice Act to Represent Federal Debtors Nationwide before the SBA, The SBA Office of Hearings and Appeals, the Treasury Department, and the Bureau of Fiscal Service.
Clients executed personal and corporate guarantees for an SBA 7(a) loan from a Preferred Lender Provider (PLP). The borrower corporation defaulted on the loan exposing all collateral pledged by the Clients. The SBA subsequently acquired the loan balance from the PLP, including the right to collect against all guarantors. The SBA sent the Official Pre-Referral Notice to the guarantors giving them sixty (60) days to either pay the outstanding balance in full, negotiate a Repayment (Offer in Compromise (OIC) or Structured Workout (SW)), challenge their alleged guarantor liability or file a Request for Hearing (Appeals Petition) with the SBA Office of Hearings & Appeals.
Because the Clients were not financially eligible for an OIC, they opted for Structured Workout negotiations directly with the SBA before the debt was transferred to the Bureau of Fiscal Service, a division of the U.S. Department of Treasury for enforced collection.
The Firm was hired to negotiate a global Workout Agreement directly with the SBA to resolve the personal and corporate guarantees. After submitting the Structured Workout proposal, the assigned SBA Loan Specialist approved the requested terms in under ten (10) days without any lengthy back and forth negotiations.
The favorable terms of the Workout included an extended maturity at an affordable principal amount, along with a significantly reduced interest rate saving the Clients approximately $181,000 in administrative fees, penalties and interest (contract interest rate and Current Value of Funds Rate (CVFR)) as authorized by 31 U.S.C. § 3717(e) had the SBA loan been transferred to BFS.
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.
Clients' 7(a) loan was referred to Treasury's Bureau of Fiscal Service for enforced collection in 2015. They not only personally guaranteed the loan, but also pledged their primary residence as additional collateral. One of the clients filed for Chapter 7 bankruptcy thinking that it would discharge the SBA 7(a) lien encumbering their home. They later discovered that they were mistakenly advised. The Firm was subsequently hired to review their case and defend against a series of collection actions. Eventually, we were able to negotiate a structured workout for $180,000 directly with the SBA, saving them approximately $250,000 (by reducing the default interest rate and removing Treasury's substantial collection fees) and from possible foreclosure.
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