How Can I Get an SBA Loan Deferment?
Are you straining with your SBA loan repayment and you are opting to defer the loan. Read this article to know how you can get an SBA loan deferment.
Learn about the wage garnishment limits for defaulted SBA loans, including how much of your paycheck can be taken, and explore legal protections and repayment options.
Book a Consultation CallIf you've defaulted on an SBA (Small Business Administration) loan, it’s important to understand the potential financial consequences, including wage garnishment. Wage garnishment can be a serious burden, affecting your paycheck and financial stability. This article provides a breakdown of how much of your paycheck can be garnished if you default on an SBA loan, along with the legal limits imposed by federal law.
Wage garnishment occurs when a creditor, in this case the SBA, obtains an order to deduct a portion of your earnings directly from your paycheck to settle an outstanding debt. In the case of a defaulted SBA loan, the federal government or the lending institution that backed the loan can seek wage garnishment to recover the debt.
For more details on how wage garnishment works, you can visit the U.S. Department of Labor’s overview.
SBA loans are backed by the federal government or made directly by the SBA, and if your loan was issued by the SBA or guaranteed by the SBA, you may be subject to an administrative wage garnishment. Specifically, administrative wage garnishment (AWG) allows federal agencies to garnish wages without needing a court order. Here are the key details:
• 15% Limit for Federal Loans: Under the Debt Collection Improvement Act, federal agencies can garnish up to 15% of your disposable income to recover delinquent federal debts, including SBA loans backed by the U.S. government.
• No Court Order Required: Unlike garnishment pursued by private creditors, federal agencies can implement wage garnishment without obtaining a court order through a process called administrative wage garnishment. However, the borrower must be given notice and the opportunity to challenge the garnishment before it begins.
For more information on administrative wage garnishment, check out the U.S. Department of the Treasury.
To provide a clearer picture, let’s consider a hypothetical scenario for wage garnishment due to a defaulted SBA loan.
• Scenario: You earn $1,000 per week in disposable income after taxes and other withholdings.
• Private Lender (25% Rule): If the SBA loan was issued by a private lender, they can garnish up to 25% of your disposable income. In this case, that would amount to $250 per week.
• Federal Loan (15% Rule): If the SBA loan was issued by the SBA or guaranteed by the SBA, they can garnish up to 15% of your disposable income. That would amount to $150 per week.
You are entitled to a hearing and the right to provide evidence in your defense or that an AWG would cause a financial hardship. If you submit your hearing request timely, the AWG cannot start until a hearing is conducted and the decision does not go in your favor.
If you’re facing wage garnishment for a defaulted SBA loan, there are steps you can take to protect your income and explore repayment options:
1. Negotiate a Repayment Plan: Contact the creditor or the SBA to discuss setting up a repayment plan that works within your budget. Lenders may be willing to work with you to avoid garnishment.
2. Seek Legal Counsel: Consult with a qualified attorney who specializes in debt relief or SBA loans. An attorney can review your case and may be able to help you reduce or stop the garnishment.
3. Request a Hearing: If you believe the garnishment amount is too high or you dispute the debt, you can request a hearing to challenge the garnishment order.
4. Bankruptcy Consideration: While it should be a last resort, filing for bankruptcy can halt wage garnishment and provide time to restructure or discharge your debts.
Wage garnishment can severely impact your financial well-being, especially if you're already struggling with a defaulted SBA loan. If you’re concerned about garnishment or facing ongoing wage deductions, it's vital to seek legal assistance. Contact Protect Law Group to schedule a consultation with one of our experienced SBA loan attorneys. We can help you explore your options and create a plan to protect your income and resolve your debt.
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.
Our firm successfully resolved an SBA 7a loan in the original amount of $364,000 for a New Jersey-based borrower. The client filed Chapter 7 bankruptcy but the mortgage on his real estate securing the loan remained in place. The available equity amounted to $263,470 and the deficiency equaled $317,886.
We gathered the pertinent documentation and prepared a comprehensive collateral analysis. We negotiated directly with the SBA, obtaining a full release of the mortgage for $80,000.
Client's small business obtained an SBA COVID EIDL for $301,000 pledging collateral by executing the Note, Unconditional Guarantee and Security Agreement. The business defaulted on the loan and the SBA CESC called the Note and Guarantee, accelerated the principal balance due, accrued interest and retracted the 30-year term schedule.
The loan was transferred to the Treasury's Bureau of Fiscal Service which resulted in the statutory addition of $90,000+ in administrative fees, costs, penalties and interest with the total debt now at $391.000+. Treasury also initiated a Treasury Offset Program (TOP) levy against the client's federal contractor payments for the full amount each month - intercepting all of its revenue and pushing the business to the brink of bankruptcy.
The Firm was hired to investigate and find an alternate solution to the bankruptcy option. After submitting formal production requests for all government records, it was discovered that the SBA failed to send the required Official 60-Day Pre-Referral Notice to the borrower and guarantor prior to referring the debt to Treasury. This procedural due process violation served as the basis to submit a Cross-Servicing Dispute to recall the debt from Treasury back to the SBA and to negotiate a reinstatement of the original 30-year maturity date, a modified workout, cessation of the TOP levy against the federal contractor payments and removal of the $90,000+ Treasury-based collection fees, interest and penalties.
Clients executed several trust deeds pledging seven (7) real estate properties and unconditional personal guarantees for an SBA 7(a) loan from the participating lender. The clients' small business failed and eventually defaulted on repayment of the loan exposing all collateral pledged by the clients. The SBA subsequently acquired the loan balance from the lender, including the right to liquidate and collect all pledged collateral pursuant to the trust deed instruments.
The Firm was hired to negotiate separate release of lien proposals for all 7 real estate properties. In preparation for the work assignment, the Firm Attorneys initiated discovery to secure records from the SBA and Treasury's Bureau of Fiscal Service. After reviewing the records and understanding the interplay between the lender and the SBA, the attorneys then prepared, submitted and negotiated the release of lien (ROL) for each of the 7 real estate properties for consideration.
After submitting the proposals, the assigned SBA Loan Specialists approved each ROL package - significantly reducing the total SBA debt claimed.
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