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.
Client’s small business obtained an SBA 7(a) loan for $750,000. She and her husband signed personal guarantees exposing all of their non-exempt income and assets. With just 18 months left on the maturity date and payment on the remaining balance, the Great Recession of 2008 hit, which ultimately caused the business to fail and default on the loan terms. The 7(a) lender accelerated and sent a demand for full payment of the remaining loan balance. The SBA lender’s note allowed for a default interest rate of about 7% per year. In response to the lender's aggressive collection action, Client's husband filed for Chapter 7 bankruptcy in an attempt to protect against their personal assets. However, his bankruptcy discharge did not relieve the Client's personal guarantee liability for the SBA debt. The SBA lender opted to pursue the SBA 7(a) Guaranty and subsequently assigned the loan and the right to enforce collection against the Client to the SBA. The Client then received the SBA Official 60-Day Notice. After conducting a Case Evaluation with her, she then hired the Firm to respond and negotiate on her behalf with just 34 days left before the impending referral to Treasury. The Client wanted to dispute the SBA’s alleged debt balance as stated in the 60-Day Notice by claiming the 7(a) lender failed to liquidate business collateral in a commercially reasonable manner - which if done properly - proceeds would have paid back the entire debt balance. However, due to time constraints, waivers contained in the SBA loan instruments, including the fact the Client was not able to inspect the SBA's records for investigation purposes before the remaining deadline, Client agreed to submit a Structured Workout for the alleged balance in response to the Official 60-Day Notice as she was not eligible for an Offer in Compromise (OIC) because of equity in non-exempt income and assets. After back and forth negotiations, the SBA Loan Specialist approved the Workout proposal, reducing the Client's purported liability by nearly $142,142.27 in accrued interest, and statutory collection fees. Without the Firm's intervention and subsequent approval of the Workout proposal, the Client's debt amount (with accrued interest, Treasury's statutory collection fee and Treasury's interest based on the Current Value of Funds Rate (CVFR) would have been nearly $291,030.
Client personally guaranteed SBA 7(a) loan balance of $58,000. The client received a notice of Intent to initiate Administrative Wage Garnishment (AWG) Proceedings. We represented the client at the hearing and successfully defeated the AWG Order based on several legal and equitable grounds.
Client personally guaranteed SBA 7(a) loan for $350,000. The small business failed but because of the personal guarantee liability, the client continued to pay the monthly principal & interest out-of-pocket draining his savings. The client hired a local attorney but quickly realized that he was not familiar with SBA-backed loans or their standard operating procedures. Our firm was subsequently hired after the client received the SBA's official 60-day notice. After back-and-forth negotiations, we were able to convince the SBA to reinstate the loan, retract the acceleration of the outstanding balance, modify the original terms, and approve a structured workout reducing the interest rate from 7.75% to 0% and extending the maturity date for a longer period to make the monthly payments affordable. In conclusion, not only we were able to help the client avoid litigation and bankruptcy, but our SBA lawyers also saved him approximately $227,945 over the term of the workout.
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