Start Here1 · Overdue2 · At SBA3 · At TreasuryGuarantyBankruptcy

Phase 3 of 3

At Treasury

Everything gets harder here. Not impossible — harder, and about a third more expensive.

SBA is out of the picture. The Bureau of the Fiscal Service is your servicer now, it sets the terms, and it does not need to sue you first.

What Treasury can do without a court

  • Garnish 15% of disposable pay. No lawsuit, no judgment, no judge — a letter to your employer.
  • Intercept federal and state tax refunds.
  • Offset Social Security benefits.
  • Intercept federal vendor payments. If you sell to the government, that revenue is reachable.
  • Refer the file to DOJ for actual litigation — which is what happened to a share of the 562,000 loans referred this spring.

What’s still yours

The Fiscal Service Debtor Dispute Form, a written request for an AWG hearing, a negotiated repayment plan, and a Treasury-side compromise.

The windows are short and exact. To stop a wage garnishment before it starts, your written hearing request must reach the Bureau of the Fiscal Service within 15 business days of the date on the garnishment notice. Miss it and a hearing is still available, but the garnishment order can go to your employer in the meantime. The clock started the day the notice was dated — not the day you opened it.

These are the official Treasury pages, so you can see the process and the deadlines directly. The hearing request and any hardship claim have specific requirements, and a botched pro se filing can forfeit the right — this is a point to have counsel, not to improvise.
AWG hearingRequest for hearing, hardship claim, and the individual debtor’s rightsWhere the 15-business-day deadline lives.Treasury — AWG for individuals
Cross-ServicingDebtor Dispute Form, debtor financial statements, payment optionsTreasury’s own overview of what it can do and what you can request.Treasury — Cross-Servicing

The 30% surcharge is superficially legal

When the debt crosses over, a collection fee of 28–30% attaches. On a $500,000 balance that’s roughly $150,000 added overnight — then collected out of the same 15% garnishment for correspondingly longer.

Under 31 C.F.R. § 285.12(j), Treasury may charge fees “sufficient to cover the full cost” of collection, may calculate them “based on a percentage of collections,” and — critically — those fees “may be determined based on overall program costs and need not be based on costs related to the collection of a specific debt.” The fee reaches you only through that paragraph’s last sentence: it may be added to the debt “if authorized under 31 U.S.C. 3717(e).”

And § 3717(e) authorizes a charge “to cover the cost of processing and handling a delinquent claim.” That is cost-recovery language. So the regulation permits a fee expressly untethered from the cost of collecting your debt, then passes it to you under a statute authorizing recovery of the cost of collecting your debt.

The surcharge is authorized, routinely applied, and will not be waived because you point this out in a letter.

The only thing that still works here

The automatic stay. A bankruptcy filing halts the garnishment, the offsets, and the intercepts on the day of filing — not after a hearing, not after negotiation. It is the only tool on this page that doesn’t require Treasury’s cooperation.

ContinueNext →Bankruptcy — the only reversalThe automatic stay halts garnishment, offsets, and intercepts the day you file — no hearing, no negotiation required.Also relevantThe overviewYour personal guaranty

Now you know what to ask

Come with your phase, your loan number, your guaranty (or the fact that you don’t have one), and the last letter you received. That’s a first conversation worth having. Lakelaw is a bankruptcy boutique. David P. Leibowitz has practiced bankruptcy law for more than fifty-two years. The first conversation costs nothing and is confidential.

Schedule a free consultation or call 312-662-5750.

Attorney advertising material. General information about SBA loans, federal debt collection, and bankruptcy — not legal advice. Reading it creates no attorney-client relationship. Every case turns on its own documents and facts.

Nothing here is a promise, guarantee, or prediction about any result. Prior results do not guarantee a similar outcome. Bankruptcy relief is available only to those who qualify.

Federal regulations, SBA standard operating procedures, statutory debt limits, and collection practices change — sometimes on short notice, as the March 31, 2026 expiration of SBA’s servicing waiver demonstrates. Figures are current as of publication and should be verified before you rely on them.

© 2026 Law Offices of David P. Leibowitz, LLC. We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.