Do I Have to Repay My Unsecured Covid SBA Loan or Can They Garnish Me?


Dear Steve,

When I received money from a COVID-related disbursement from the SBA I was told it was “an unsecured loan”.

Will the SBA be able to invoke federal statute to withhold Social Security Retirement payments to secure repayment of such a loan that is “unsecured”? Does the fact this is classified as a “Disaster Loan” make any difference?

Do you agree that if the loan is truly “unsecured” as the SBA said, any and all funds are not subject to garnishment?

Thank you.



Dear David,

You would have loved the original answer I wrote but the computer didn’t save. LOL.

So here is a shorter version.

It sounds to me that you received an SBA Economic Injury Disaster Loan (EIDL). We both agree it is a loan. The fact it is secured or unsecured is really a non-issue.

At the very least the loan is secured by your relationship with the U.S. Government. Failure to pay the loan can result in your Social Security being garnished when you start to collect, your tax returns being intercepted, or an Administrative Wage Garnishment (AWG).

An AWG is an easy process since the government does not have to go to court to get your wages garnished.

“An employer who fails to comply with an AWG order is liable for amounts that the employer fails to withhold, plus possible penalties and fees. Noncompliance with an AWG order, including failure to honor a Notice of Termination of Wage Garnishment Order, may result in legal action.”

Let me summarize this for you, yep, you’re screwed.


You are not alone. I’m here to help. There is no need to suffer in silence. We can get through this. Tomorrow can be better than today. Don’t give up.

Damon Day - Pro Debt Coach