Mary defaulted on an SBA loan with her husband over thirty years ago. Now widowed and 70, she recently received notice that the SBA authorized a garnishment of 15% or $165 from her only income, $1100 Social Security. Already impoverished, left with $435 after rent, she cried, “How can I pay for my medicine and food?”
The “Debt Collection Improvement Act of 1996” governs the collection of debts owed to federal agencies like the SBA, FmHA, VA, USDA, and RDA. Each agency is responsible for collecting its debt. 15% of Social Security can be garnished after sixty-day notice. A minimum of $750 of Social Security is protected.
Eric Olsen, Executive Director of HELPS, a national nonprofit law firm that protects and assists lower-income and poor seniors, explains, “A senior could attempt to settle with the agency, but that is not possible for many. There are laws in place that can stop or prevent the garnishment of Social Security by the IRS or student loan lender for lower-income seniors, but no such laws to stop a garnishment by federal agencies like the SBA. Nor is there a time limit, this can happen decades later.”
Olsen further explains, “HELPS has seen a significant uptick in this practice. Many already impoverished seniors will be placed in utter poverty unless Congress acts soon to change this law. It would be simple to raise the minimum amount of Social Security protected from $750 set in 1996 to around $1250 in today’s dollars. Or better yet, require these agencies to follow the same procedures offered by the IRS for non-collectible now status for persons who owe taxes.”
HELPS Nonprofit Law Firm urges federal lawmakers to act now. HELPS declares, “This practice devastates the most vulnerable among us, already impoverished seniors. Surely this is something all sides can agree needs to be quickly changed.”