How Much of Your Paycheck Can Be Garnished for a Defaulted SBA Loan?
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.
We provide people who are facing an SBA loan default with solutions. We analyze SBA loan problems and provide solutions such as an SBA offer in compromise.
Book a Consultation CallDealing with the idea that you might be facing an SBA loan default can be terrifying. The SBA attorneys in our office are skilled at helping clients understand all the facets of their situation. We will advise you as to the potential for an SBA offer in compromise. You should never face your SBA loan problems alone. It is important to retain the services of an attorney who can help you through this difficult time in your life. Please contact us for a consultation.
Structural barriers appear to be holding back bank lending to small businesses.
A long move toward consolidation of banking assets into less and less banks is denying a key source of capital for small firms. Community banks are being consolidated by big banks, with the number of community banks dropping to fewer than 7,000 today, a decrease from over 14,000 in the mid-1980s, while average bank assets continues to rise. This trend was made even greater by the financial crisis.
Additionally, the costs of borrowers and lenders matching up is very high. It is difficult for qualified borrowers to find willing lenders, and vice versa. Federal Reserve research finds that small-business borrowers can spend almost 25 hours on paperwork for bank loans, and are often submitting applications to multiple banks. Successful applicants wait weeks or, in some cases, a month or more for the funds to actually be approved and made available.
Furthermore, small-business loans, usually loans below $1 million, are considerably less profitable than large business loans for several reasons, including: Small-business lending is riskier than large-business lending. Small businesses are much more sensitive to swings in the economy, have higher failure rates, and fewer assets to collateralize.
Determining creditworthiness of small businesses can be hard due to a lack of transparent information. Little, if any, public information exists about the performance of most small businesses as they are not subject to disclosure and securities laws like larger borrowers. Many small businesses also fail to keep detailed balance sheets, use bare bones tax returns, and keep insufficient income statements. Community banks have historically placed more importance on relationships with borrowers in their underwriting processes, but these relationships are expensive and have not in the past translated well to automated methods for assessing creditworthiness, which are favored by larger banks.
Transaction costs to process a $100,000 loan are similar to a $1 million loan, but with less profit. As a result, banks are less likely to do business lending at the smallest dollar level. Some banks, particularly larger banks, have significantly reduced or eliminated loans below a certain threshold, typically $100,000 or $250,000, or simply will not lend to small businesses with revenue of less than $2 million, as a way to limit time-consuming applications from small businesses. This creates a problem in the market as over half of small businesses are believed to be looking for loans of under $100,000, leaving a large gap in the small business loan market. Often times, the biggest banks refer small businesses below such revenue thresholds or seeking such low dollar loans to their small business credit card products, which earn higher yields.
As the economy chugs along in its slow recovery from the recession, it appears unlikely that all the barriers to bank lending to small business will disappear. If you are in danger of falling into an SBA loan default, please contact us for a case evaluation.
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 obtained an SBA 7(a) loan for $324,000 to buy a small business and its facility. The business and real estate had an appraisal value of $318,000 at the time of purchase. The business ultimately failed but the participating lender abandoned the business equipment and real estate collateral even though it had valid security liens. As a result, the lender recouped nearly nothing from the pledged collateral, leaving the business owners liable for the deficiency balance. The SBA paid the lender the 7(a) guaranty money and was assigned ownership of the debt, including the right to collect. However, the clients never received the SBA Official 60-Day Notice and were denied the opportunity to negotiate an Offer in Compromise (OIC) or a Workout directly with the SBA before being transferred to Treasury's Bureau of Fiscal Service, which added an additional $80,000 in collection fees. Treasury garnished and offset the clients' wages, federal salary and social security benefits. When the clients tried to negotiate with Treasury by themselves, they were offered an unaffordable repayment plan which would have caused severe financial hardship. Clients subsequently hired the Firm to litigate an Appeals Petition before the SBA Office & Hearings Appeals (OHA) challenging the legal enforceability and amount of the debt. The Firm successfully negotiated a term OIC that was approved by the SBA Office of General Counsel, saving the clients approximately $205,000.
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.
Clients borrowed and personally guaranteed an SBA 7(a) loan. Clients defaulted on the SBA loan and were sued in federal district court for breach of contract. The SBA lender demanded the Client pledge several personal real estate properties as collateral to reinstate and secure the defaulted SBA loan. We were subsequently hired to intervene and aggressively defend the lawsuit. After several months of litigation, our attorneys negotiated a reinstatement of the SBA loan and a structured workout that did not involve any liens against the Client's personal real estate holdings.
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