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Will the Judgment Garnish the EIDL Loan Proceeds for the Charity?

Written by Steve Rhode

Question:

Dear Steve,

I received an EIDL loan for $7500 for a non-profit charity with the charity EIN. I am the main officer with 70% interest. I had to list the 2 other officers. One of the officers is my sister, who has a judgment from a creditor for credit card debt. On her lawsuit of documents filed with the court now says the name of the charity as garnishee. The title is a writ of garnishment. The bank account with the money is in my name. Can they do anything?

Can they attach my bank account? Thanks for your time

Lynn

Answer:

Dear Lynn,

I am not an attorney, so I can’t give you any legal advice. You would need to speak with an attorney licensed to practice law in your state.

Here is what I can decipher from what you shared.

1. The charity obtained an Economic Injury Disaster Loan from the SmallBusiness Administration (SBA). This may have been under the COVID-19 program.

This is what the SBA says about EIDLs.

COVID-19 Economic Injury Disaster Loans

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2. You say you have a 70 percent interest in the non-profit charity. However, a non-profit organization is a non-stock business. There are no owners. “A nonprofit corporation has no owners (shareholders) whatsoever. Nonprofit corporations do not declare shares of stock when established. In fact, some states refer to nonprofit corporations as non-stock corporations.” – Source

While others might serve administratively on behalf of the non-profit charity, “Governance responsibility is vested in the board of directors or trustees. These individuals are accountable to state and federal authorities to ensure the organization operates in a legally compliant manner and for the purposes outlined at formation.”

So the percentage of control position is a bit confusing to me.

3. It sounds like your sister was personally sued and had identified that she was an employee of the charity. You would need to refer to the document the court provided for specific instructions, but it sounds as if the suit was against your sister personally. The garnishment is for the charity, as the employer, to garnish your sister’s wages.

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Given the facts, as you’ve shared them, it does not appear that the charity was a Defendant in the suit. If that is the case, I’m not certain how the charity bank account would be able to be garnished. You, as the charity, would have to garnish your sister from any wages paid to her by the charity.

Again, that is just my take on things. For a legal opinion, talk to an attorney.


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Steve Rhode

Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.

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