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.
Our firm successfully assisted a client in closing an SBA Disaster Loan tied to a COVID-19 Economic Injury Disaster Loan (EIDL). The borrower obtained an EIDL loan of $153,800, but due to the prolonged economic impact of the COVID-19 pandemic, the business was unable to recover and ultimately closed.
As part of the business closure review and audit, we worked closely with the SBA to negotiate a resolution. The borrower was required to pay only $1,625 to release the remaining collateral, effectively closing the matter without further financial liability for the owner/officer.
This case highlights the importance of strategic negotiations when dealing with SBA settlements, particularly for businesses that have shut down due to unforeseen economic challenges. If you or your business are struggling with SBA loan debt, we focus on SBA Offer in Compromise (SBA OIC) solutions to help settle outstanding obligations efficiently.
The clients are personally guaranteed an SBA 7(a) loan. The SBA referred the debt to the Department of Treasury, which was seeking payment of $487,981 from our clients. We initially filed a Cross-Servicing Dispute, which was denied. As a result, we filed an Appeals Petition with the SBA Office of Hearings and Appeals asserting legal defenses and supporting evidence uncovered during the discovery and investigation phase of our services. Ultimately, the SBA settled the debt for $25,000 - saving our clients approximately $462,981.
Client personally guaranteed an SBA 7(a) loan for $100,000 from the lender. The SBA loan went into early default in 2006 less than 12 months from disbursement. The SBA paid the 7(a) guaranty monies to the lender and subsequently acquired the deficiency balance of about $96,000, including the right to collect against the guarantor. However, the SBA sent the Official 60-Day Due Process Notice to the Client's defunct business address instead of his personal residence, which he never received. As a result, the debt was transferred to Treasury's Bureau of Fiscal Service where substantial collection fees were assessed, including accrued interest per the promissory note. Treasury eventually referred the debt to a Private Collection Agency (PCA) - Pioneer Credit Recovery, Inc. Pioneer sent a demand letter claiming a debt balance of almost $310,000 - a shocking 223% increase from the original loan amount assigned to the SBA. Client's social security disability benefits were seized through the Treasury Offset Program (TOP). Client hired the Firm to represent him as the debt continued to snowball despite seizure of his social security benefits and federal tax refunds as the involuntary payments were first applied to Treasury's collection fees, then to accrued interest with minimal allocation to the SBA principal balance.
We initially submitted a Cross-Servicing Dispute (CSD) challenging the referral of the debt to Treasury based on the defective notice sent to the defunct business address. Despite overwhelming evidence proving a violation of the Client's Due Process rights, the SBA still rejected the CSD. As a result, an Appeals Petition was filed with the SBA Office of Hearings & Appeals (OHA) Court challenging the SBA decision and its certification the debt was legally enforceable in the amount claimed. After several months of litigation before the SBA OHA Court, our Firm Attorney successfully negotiated an Offer in Compromise (OIC) Term Workout with the SBA Supervising Trial Attorney for $82,000 spread over a term of 74 months at a significantly reduced interest rate saving the Client an estimated $241,000 in Treasury collection fees, accrued interest (contract interest rate and Current Value of Funds Rate (CVFR)), and the PCA contingency fee.
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