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

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

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.

Sincerly,


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4 thoughts on “Will the Judgment Garnish the EIDL Loan Proceeds for the Charity?”

  1. Hello Steve, thank you in advance for looking into our situation. We have an S-Corporation in Pennsylvania, which has a judgment against it for well over $500,000, that we believe was obtained fraudulently. We are still fighting the lawyers and have already paid quite a few lawyers a lot in “upfront retainers” for which they have failed in their services. An application for EIDL funding has already been applied and approved, as they are awaiting the signing of required documentation prior to the wiring of funds into our corporate business bank account. The judgment is against all parties of our business, as follows: the corporation, the 100% stockholder and the President. Do the “plaintiff lawyers and the bank”, with whom we do business, have access to any information related to the EIDL funding? Finally, and of course, do you have any suggestions on what options we have? And once again, thank you in advance for your suggestion(s) and time, as it is greatly appreciated. Ronald

    Reply
    • Unfortunately, your question is particular and is more of a technical legal issue. I am not an attorney and can’t give you legal advice. I’m not sure the specialty of attorney you have retained in the past, but I would look for a firm or attorney that has skills similar to https://starfieldsmith.com/

      If this is purely an SBA issue and federal the attorney does not have to be located in PA since they would not be giving your Pennsylvania advice.

      For the part of the question regarding Pennsylvania law, you would need a PA licensed attorney.

      Until now, I’m not sure what your strategy has been, but decoupling the local and federal issues might be a good idea since it requires two different specialized attorneys.

      Reply

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