By Eric Olsen, Executive Director, attorney, HELPS Nonprofit Law Firm
In 1996 a federal law was passed governing the collection of debts owed to federal agencies. It is called the “Debt Collection Improvement Act of 1996.” This law authorized a 15% garnishment of social security for various debts owed to federal agencies. Each agency is responsible for collecting the debt it is owed. An agency requests the Treasury Department set-off 15% of Social Security a senior receives to repay the agency. This garnishment of Social Security occurs without a court judgment. A Social Security recipient is sent a notice of intent to set-off 15% of Social Security. The garnishment begins in 60 days.
The IRS regularly uses this law to garnish 15% of Social Security from seniors for past-due income taxes. Likewise, hundreds of thousands of lower-income and poor seniors are having 15% of their Social Security garnished for past-due student loans. However, the IRS has rules in place for lower-income seniors to obtain “non-collectible now” status, stopping a garnishment and paying nothing. Likewise, Congress has passed “income-based repayment” laws that allow low-income and poor seniors who owe past-due student loans to pay nothing per month. Thus stopping or preventing a garnishment of Social Security. Sadly the vast majority of lower-income seniors have no idea these programs are in place.
Tens of thousands of lower-income and poor seniors are having 15% of their Social Security garnished each month by federal agencies such as the SBA, FmHA, VA, USDA, Rural Development Commission, and military banks. Often for debts that are decades old. Tragically, unlike for IRS or Student loan debt, there is no law to stop or prevent garnishment 15% of a senior’s Social Security because of financial hardship by other federal agencies.
My name is Eric Olsen, Executive Director of HELPS, a national charitable nonprofit law firm that helps lower-income and impoverished seniors. Every day we talk with senior citizens whose Social Security is garnished by federal agencies. For example, yesterday, I spoke with a 70-year-old widow. Sometime back, the SBA, (Small Business Administration, a federal agency) authorized a garnishment of 15% of her only income, $1100 monthly social security. This for a $7500 deficiency on a loan she had cosigned with her now-deceased husband decades ago. While there is a six-year statute of limitations for a federal agency to file a lawsuit for a civil judgment, there is no time limitation for a 15% offset of social security. Like this widow, thousands of other seniors are finding their social security offset for a debt they had long forgotten.
Left with only $935 after the garnishment and rent of $500, she was in utter poverty. “Mr. Olsen, How can I pay for my medicines,” she asked. Had she owed the IRS or a student loan, HELPS Nonprofit Law Firm could have assisted in stopping or preventing a garnishment of her social security. But instead, this widow, like thousands of others, is being garnished for an old debt owed to a federal agency with no way to stop it. Yes, she could file bankruptcy, but where will she get the money to file bankruptcy? The law allows agencies to settle debt, but where would such a senior find money to offer in settlement or even know where to start? Instead, these seniors suffer silently, knowing no other option.
Why, if there is a hardship system in place to stop social security garnishment for taxes or student loans, can’t there be such a procedure for the debt owed to other federal agencies. $750 in Social Security, unchanged since 1996, is protected from garnishment under this law. Based on inflation, this should be $1220 today. It would be a simple matter for lawmakers to raise the protected minimum.
Better yet, why not amend the “Debt Collection Improvement Act of 1996” to require the agencies collecting this debt to implement procedures to allow a waiver or reduction because of financial hardship. The IRS already has detailed published guidelines in place for non-collectible now status for taxes based on poverty levels. These same standards could easily be used by federal agencies to grant collection waivers and stop this draconian practice. Consider the social costs when already impoverished seniors, like the widow I recently spoke with, are garnished. When they no longer have the money for their medicines and other basic needs and have nowhere to turn for help. Do we want already impoverished seniors having 15% of their Social Security garnished? HELPS Nonprofit Law Firm encourages all persons to contact their representatives and senators requesting a stop to this practice.
Finally, seniors need to know that their income, social security, almost all pensions, disability, and VA benefits are protected by federal law from other debt collectors. Their protected income is meant for their needs and doesn’t need to be used to pay a debt they can’t afford to pay. HELPS is the only 501(c) national nonprofit law firm that protects seniors and disabled persons from collector harassment. Learn more about HELPS by visiting our website www.helpsishere.org or call us toll-free at 855 HELPS-US.