Ah, running a small business! It’s no secret that it’s not an easy ride. And look – I get it. Almost half of small businesses don’t see their first birthday and a shocking 95 out of every 100 don’t hit their fifth year. And between you and me, cash flow is usually the villain here. When there’s not enough money to keep a business running, let alone expand and replenish inventory, small business owners might turn to – you guessed it – SBA loans! Now the real question on everyone’s mind is: What happens when a small business defaults on its SBA loan? Could the Department of Treasury potentially swoop in and take a bite out of your hard-earned pie – wage garnishment style? Well, my friend, let’s delve deeper into that over a cup of coffee, shall we?

The Garnishment Dance

So a whopping 3% of Americans were staring down wage garnishment for consumer debt last year – no shoestring number by any means! So let’s take a moment to look this monster in the eye. Wage garnishment is pretty much a court saying your paycheck’s too thicc and some of it needs to go to pay off your debts. No other party – like the federal government – needs to wait on a court order to garnish wages. And that’s where things can get ugly.

What’s on the garnishment plate? It could be credit card debt, student loans, auto loans, alimony, or child support. But worry not, for garnishers can’t secure your entire paycheck. The Wage and Hour Division of the Department of Labor is our friend here. It calculates the maximum portion of your paycheck open to garnishment.

So, are we all on the same page about wage garnishment? Great. Now let’s see how this ties in with SBA loans and the Department of Treasury.

Is Your Loan Fair Game for The Department of Treasury?

Uh-oh, you’ve defaulted on your SBA loan. Is your paycheck up for grabs now? The Department of Treasury sure thinks so! It’s armoured with the Bureau of Fiscal Service and it’s not afraid to use it. This fiend handles all collections and garnishments for federal agencies, including the Treasury. It’s not your regular garnishment – it’s what they call administrative wage garnishment, or AWG.

The Department of Treasury uses these AWGs to hold back up to 15% of an employee’s disposable income, in case you owe a non-tax debt to the feds. Good news? You can appeal against an AWG – and here’s how to go about it.

Fighting the Garnishment Order

Keep in mind, the Fiscal Service has no time or need for court orders. If they’re tapping their nibs, preparing to garnish your wages, they won’t wait on a court order.

Now, before they send a garnishment order, they’ll send you a notice of their intent. You’ve got 15 days from the time this notice is mailed to request a hearing. If you’re late, buckle up, because there’s still a chance that the garnishment could happen while you’re waiting on a hearing.

Why should you request a hearing? Well, this is your battle arena where you can dispute the amount you owe, or even the existence of the debt itself. This is also where you can hash out the conditions for your proposed repayment schedule.

Unemployment and Bankruptcy

Were you forcibly de-crowned from your job? Have you been jobless for at least a year? Then it’s time to let the Fiscal Service know.

If you’re knee-deep in bankruptcy proceedings, there’s usually a stay put in place. You can sleep easy knowing that the garnishment storm won’t hit while a bankruptcy stay’s in effect. Just make sure you have the Fiscal Service on speed dial to let them know.

When it comes to sorting out defaults on their loans, the Small Business Administration is all prepped up with a hearing process.

Walking the SBA Loan Tightrope

If your business is wallowing in a SBA loan default, you don’t have to sail that storm all by yourself. I recommend having a seasoned legal team like the professionals at Lawscape by your side to negotiate the winding maze of the debt resolution process.

Trust me, that’s one smart move! A legal representative speaking for you makes the SBA sit up and take notice. Plus, everything you need to know about SBA loan recovery is right there on their fingertips.

Help’s on the Way!

Yes, wage garnishment is scary. The Department of Treasury can garnish your wages and they won’t hesitate. That’s all the more reason to engage with the SBA to resolve your loan default.

If you’re stuck with your SBA loan, Lawscape and the team at Lawscape are here to help. Have your case evaluated with Lawscape today, and let’s get you back on solid ground!