Yes, the SBA through the Department of Treasury can garnish your Social Security. But you do have options to stop the Social Security garnishment.
Book a Consultation CallIf you have defaulted on an SBA loan and you are a personal guarantor, the SBA, through the Department of Treasury, can garnish your Social Security benefits. The government calls this an "offset." By way of this offset, the federal government can take a portion of your monthly Social Security benefit. It’s important to act quickly, as time is often of the essence in addressing garnishment issues. If you and your spouse were both personal guarantors, the SBA will subject both of you to a Social Security garnishment or "offset."
The SBA can take up to 15% of your Social Security benefits. So, if you receive $1,000 a month, you could lose $150. However, by statute, your benefit payments of up to $9,000 per year—or $750 per month—are exempt from offset. That is, the aggregate amount of your monthly benefit payments must exceed $750 to qualify for offset. Congress imposed the 15% limitation by regulation in response to the concerns some members of Congress expressed when enacting the Debt Collection Improvement Act, which authorizes the offset scheme. Understanding these limits is crucial, especially if you rely on Social Security as a primary income source. Congress worried that federal benefit recipients may depend on the Social Security benefit payments for a substantial part of their income. With these concerns in mind, the Department of Treasury imposed the 15% limit on the offset of Social Security benefit payments.
In other words, the amount of a Social Security payment eligible for offset is the lesser of:
(i) the amount of the debt;
(ii) an amount equal to 15% of the monthly covered benefit payment; or,
(iii) the amount, if any, by which the monthly covered benefit payment exceeds $750.
For example, if you receive a monthly Social Security payment of $850, the amount that can be offset is the lesser of $127.50 (15% of $850) or $100 (the amount by which $850 exceeds $750). This nuanced calculation can cause confusion, so staying informed about the rules will benefit you. In this example, assuming the debt is at least $100, the amount that can be offset is $100 each month.
Unfortunately, Congress and the Department of Treasury already accounted for a hardship with the offset limits discussed above. Even though the $100 garnishment in the example above may constitute a financial hardship for you, the government provided no mechanism to appeal the garnishment or have it reviewed based on financial hardship or reduced. This lack of recourse can leave individuals feeling trapped, emphasizing the importance of preventive measures.
Certain avenues exist that may be available to you to stop the Social Security garnishment. These avenues include forcing the SBA to "recall" the debt from the Department of Treasury and submitting an offer in compromise with the SBA to settle the debt. A proactive approach can often yield better results, so it’s advisable to explore these options soon. Another available strategy may include an appeal to the SBA Office of Hearings and Appeals if you do not believe you owe the debt, but only if you exhaust certain other administrative avenues first.
Lastly, you may be able to appeal to your Federal District Court. Again, you may need to exhaust certain administrative prerequisites before you can go to Federal District Court. Given the complex nature of these processes, having legal assistance is often vital to navigate successfully. All of these potential remedies require experienced legal help.
Please contact Protect Law Group today and schedule a free initial consultation with one of our experienced, assertive attorneys. Our attorneys have years of experience dealing with Social Security garnishments and resolving your SBA loan default situation. Their expertise can provide you with the guidance you need to take appropriate action promptly.
Millions of Dollars in SBA Debts Resolved via Offer in Compromise and Negotiated Repayment Agreements without our Clients filing for Bankruptcy or Facing Home Foreclosure
Millions of Dollars in Treasury Debts Defended Against via AWG Hearings, Treasury Offset Program Resolution, Cross-servicing Disputes, Private Collection Agency Representation, Compromise Offers and Negotiated Repayment Agreements
Our Attorneys are Authorized by the Agency Practice Act to Represent Federal Debtors Nationwide before the SBA, The SBA Office of Hearings and Appeals, the Treasury Department, and the Bureau of Fiscal Service.
Clients executed personal and corporate guarantees for an SBA 7(a) loan from a Preferred Lender Provider (PLP). The borrower corporation defaulted on the loan exposing all collateral pledged by the Clients. The SBA subsequently acquired the loan balance from the PLP, including the right to collect against all guarantors. The SBA sent the Official Pre-Referral Notice to the guarantors giving them sixty (60) days to either pay the outstanding balance in full, negotiate a Repayment (Offer in Compromise (OIC) or Structured Workout (SW)), challenge their alleged guarantor liability or file a Request for Hearing (Appeals Petition) with the SBA Office of Hearings & Appeals.
Because the Clients were not financially eligible for an OIC, they opted for Structured Workout negotiations directly with the SBA before the debt was transferred to the Bureau of Fiscal Service, a division of the U.S. Department of Treasury for enforced collection.
The Firm was hired to negotiate a global Workout Agreement directly with the SBA to resolve the personal and corporate guarantees. After submitting the Structured Workout proposal, the assigned SBA Loan Specialist approved the requested terms in under ten (10) days without any lengthy back and forth negotiations.
The favorable terms of the Workout included an extended maturity at an affordable principal amount, along with a significantly reduced interest rate saving the Clients approximately $181,000 in administrative fees, penalties and interest (contract interest rate and Current Value of Funds Rate (CVFR)) as authorized by 31 U.S.C. § 3717(e) had the SBA loan been transferred to BFS.
The client personally guaranteed an SBA 504 loan balance of $375,000. Debt had been cross-referred to the Treasury at the time we got involved with the case. We successfully had debt recalled to the SBA where we then presented an SBA OIC that was accepted for $58,000.
Our firm successfully resolved an SBA 7(a) loan default in the amount of $140,000 on behalf of a husband-and-wife guarantor pair. The business had closed following a prolonged decline in revenue, leaving the borrowers personally liable for the remaining balance.
After conducting a comprehensive financial analysis and preparing a detailed SBA Offer in Compromise (SBA OIC) package, we negotiated directly with the SBA and the lender to achieve a settlement for $70,000 — just 50% of the outstanding balance. This settlement released the borrowers from further personal liability and allowed them to move forward without the threat of enforced collection.
.jpg)
