Can Social Security Benefits Be Garnished for EIDL Debt?

So your retired (or about to retire), your living on Social Security benefits, and you have a defaulted EIDL loan that you cant pay. Maybe your business failed years ago, maybe you took the loan during COVID and could never get the business back on its feet, and now the SBA or Treasury is pursuing collection. Someone told you—or you read somewhere—that the government can garnish Social Security benefits to collect federal debts, and now your terrified. Social Security might be your ONLY income, the only thing keeping you from financial disaster, and the thought of losing part of it every month to repay this debt is keeping you up at night. Can they really do that? Can the SBA take money directly out of your Social Security check to collect on a defaulted EIDL loan? And if so, how much can they take, and is there anything you can do to protect your benefits?

Here’s what you need to know, and its not great: **Yes, the federal government CAN garnish your Social Security benefits to collect defaulted EIDL debt**. This is authorized by the Debt Collection Improvement Act of 1996, which allows Treasury to offset federal benefits—including Social Security retirement, disability, and survivor benefits—to collect delinquent federal debts owed to agencies like the SBA. However, there ARE protections: The government cant take more than 15% of your monthly Social Security payment, and the first $750 per month of your benefits is completely protected and cant be offset at all. So if you receive $1,500/month in Social Security, they can take up to 15% of the amount above $750, which works out to about $112.50/month. If you receive $850/month, they can take only $100/month (the amount above the $750 floor), even though 15% of $850 would be $127.50. The offset happens automatically through the Federal Payment Levy Program once your EIDL debt has been referred to Treasury—they dont need a court order, they dont need your permission, they just start withholding a portion of your monthly benefit and applying it to the debt.

This article explains when and how Social Security benefits can be garnished for EIDL debt, the legal authority that allows it, how the $750/month protection floor works and what it means for your actual benefits, when Social Security offset typically begins (after Treasury referral), the difference between Social Security and retirement accounts in terms of protection, what happens if Social Security is your ONLY income, what options you have to stop or prevent the garnishment (spoiler: very few), whether bankruptcy can protect you, and what to do if your already facing or worried about Social Security offset. If your living on Social Security and facing EIDL debt collection, understanding your actual risk is critical.

Can the SBA Garnish Social Security Benefits? The Short Answer

Yes. The SBA, through the Department of Treasury, can offset (garnish) your Social Security benefits to collect defaulted EIDL loans. This applies to:

• Social Security retirement benefits
• Social Security Disability Insurance (SSDI) benefits
• Social Security survivor benefits

Supplemental Security Income (SSI) is treated differently and has stronger protections (SSI generally cant be offset for most federal debts), but regular Social Security benefits (retirement, disability, survivors) ARE subject to offset for federal debts including SBA loans.

This might come as a shock if you believed Social Security was untouchable. For MOST debts, Social Security IS protected—private creditors like credit card companies, medical providers, and commercial lenders generally cant garnish Social Security benefits. But federal debts are different. The federal government has special authority to offset federal benefits to collect federal debts, and EIDL loans are federal debts owed to the SBA (a federal agency), so they fall under this authority.

The offset happens administratively without any court involvement. Treasury doesnt need to sue you, doesnt need to obtain a judgment, doesnt need a judge’s permission. They simply start withholding a portion of your monthly Social Security payment and applying it to your EIDL debt. You’ll receive notice that the offset is happening or about to happen, but by the time you get the notice, the process is usually already underway.

What Is the Legal Authority for Garnishing Social Security for SBA Debt?

The authority to offset Social Security benefits for federal debt comes from the Debt Collection Improvement Act of 1996 (DCIA). This law requires federal agencies to refer delinquent debts to the Department of Treasury for collection, and it authorizes Treasury to use the Federal Payment Levy Program (FPLP) to intercept federal benefit payments—including Social Security—to satisfy those debts.

Under Social Security Administration rules, your Social Security benefits can be garnished to pay delinquent federal debts including debts owed to federal agencies like the SBA. The key language is that federal benefits can be offset for “debts owed to the United States.” Since EIDL loans are federal loans made (or guaranteed) by the SBA, defaulting on an EIDL creates a debt owed to the United States, and that debt can be collected through benefit offset.

This is different from the protections Social Security has against PRIVATE creditors. Federal law prohibits private creditors from garnishing Social Security benefits—if you owe Visa or a hospital or a private lender, they cant touch your Social Security even if they sue you and get a judgment. But that protection doesnt apply to the federal government collecting its own debts. The government exempted itself from those restrictions when collecting federal debts, which is why Treasury can do what private creditors cannot.

How Much of My Social Security Can Be Garnished? The $750 Floor

While Social Security CAN be garnished for EIDL debt, there are limits on how much can be taken:

The 15% limit: Treasury can offset up to 15% of your monthly Social Security payment. This is the same 15% limit that applies to wage garnishment for federal debts. So if you receive $2,000/month in Social Security, the maximum offset would be $300/month (15% of $2,000).

The $750/month protection floor: This is the critical protection. The first $750 per month of your Social Security benefits is completely exempt from offset. Treasury cant touch it. Only the amount above $750 is subject to the 15% offset. This protection is specifically designed to ensure that seniors and disabled individuals receiving Social Security arent left completely destitute by federal debt collection.

Here’s how the calculation works in practice:

Example 1: You receive $1,500/month in Social Security. The amount subject to offset is $1,500 minus $750 = $750. Fifteen percent of $750 is $112.50. So Treasury would offset $112.50/month, and you’d receive $1,387.50.

Example 2: You receive $850/month in Social Security. The amount subject to offset is $850 minus $750 = $100. Fifteen percent of $100 would be $15, but wait—the offset is calculated differently. The offset is the LESSER of (A) 15% of your total benefit, or (B) the amount by which your benefit exceeds $750. Fifteen percent of $850 is $127.50. The amount above $750 is $100. The lesser of those two is $100. So Treasury would offset $100/month, and you’d receive $750.

Example 3: You receive $750/month or less in Social Security. The entire amount is below the protection floor, so NONE of it can be offset. You’d receive your full benefit with no garnishment.

The $750 floor is adjusted periodically for inflation, so the exact amount might be slightly higher depending on when your reading this and what the current exemption amount is. But the concept remains the same: the first $750 (or current exemption amount) is protected, and only amounts above that threshold are subject to 15% offset.

When Does Social Security Offset Happen for EIDL Debt?

Social Security offset doesnt happen immediately when you default on your EIDL loan. Theres a progression:

Step 1: Default and referral to Treasury. You default on your EIDL loan (typically after 120-180 days of missed payments), and the SBA refers the debt to the Department of Treasury’s Bureau of the Fiscal Service for collection. This is the critical triggering event—once your debt is with Treasury, they have the authority to use the Federal Payment Levy Program to offset federal benefits.

Step 2: Enrollment in the Federal Payment Levy Program (FPLP). Treasury enrolls your debt in the FPLP, which is an automated system that matches debtors with federal payments there entitled to receive. The system identifies that your receiving Social Security benefits, and it flags your account for offset.

Step 3: Notice of intended offset. Before the offset begins, Treasury is supposed to send you a notice informing you that your Social Security benefits will be offset to satisfy your EIDL debt. The notice should explain how much will be offset, when it will begin, and how to request a review if you believe the offset is in error. However, in practice, some borrowers report that they receive the notice AFTER the first offset has already occurred, not before. The notice requirement exists, but the timing can be problematic.

Step 4: Offset begins. The Social Security Administration receives instructions from Treasury to withhold a portion of your benefit each month and send it to Treasury to be applied to your EIDL debt. This continues month after month until the debt is paid in full, the offset is stopped through bankruptcy or other means, or you stop receiving Social Security benefits.

The timeline from default to Social Security offset varies, but its typically 6-18 months. You default, the SBA refers the debt to Treasury (which can take 6-12 months), Treasury processes the debt and enrolls it in FPLP (which can take additional months), and then the offset begins. If your EIDL loan defaulted recently, your probably not facing immediate Social Security offset—but if its been referred to Treasury and you’ve received collection notices, offset could begin at any time.

Social Security vs. Retirement Accounts—Different Protections

Its important to distinguish Social Security benefits from retirement account funds like 401(k)s and IRAs, because the protections are very different:

Social Security benefits: As discussed, these CAN be offset by up to 15% (above the $750 floor) to collect federal debts like EIDL loans. The protection is the $750/month exemption and the 15% limit—but offset is possible.

Retirement accounts (401(k), IRA, pensions): Funds held IN retirement accounts are generally protected from creditors, including the federal government in many cases. Retirement accounts receive strong protection in bankruptcy, and even outside bankruptcy, there are significant restrictions on seizing retirement funds. HOWEVER, once you withdraw money from a retirement account and deposit it into a regular bank account, it loses the retirement account protection and can be levied like any other funds. So if you take a $10,000 distribution from your IRA and deposit it in your checking account, Treasury could levy that checking account and seize the $10,000 even though it originally came from a protected retirement account.

The practical implication: If your living on Social Security, that income stream can be offset at the source—Treasury intercepts it before it even reaches you. If your living on distributions from a 401(k), the funds in the account are generally protected, but once you withdraw them and they land in your bank account, they become vulnerable to levy. The protection for retirement funds is to keep them IN the retirement account as long as possible and only withdraw what you need when you need it, rather than taking large distributions that sit in a bank account where they can be seized.

What If Social Security Is My ONLY Income?

If Social Security is your only source of income and your barely making ends meet on that benefit, the idea of losing 15% of it to EIDL debt collection is terrifying. Unfortunately, the law doesnt provide a financial hardship exemption for Social Security offset the way it does for wage garnishment.

With wage garnishment for federal debts, you can sometimes request a hardship exemption if the garnishment would prevent you from affording basic necessities like rent and food. But theres no equivalent hardship exemption for Social Security offset for SBA/EIDL debt. The $750/month floor IS the hardship protection—Congress determined that protecting the first $750/month provides a minimum subsistence level, and amounts above that can be offset regardless of whether it causes hardship.

So if your receiving $1,200/month in Social Security and thats your only income, and losing $67.50/month (15% of the $450 above the $750 floor) would cause you genuine hardship, theres no process to request exemption based on hardship. The offset will happen regardless of your financial situation, as long as your benefit exceeds the $750 floor.

Your only realistic options in that situation are:

• Negotiate a payment plan with Treasury that stops the offset in exchange for you making agreed monthly payments (though this just shifts the payment from automatic offset to voluntary payment—your still paying)
• File bankruptcy to discharge the EIDL debt, which would stop the Social Security offset permanently
• Wait for the debt to be fully collected through offset, which could take many years

Theres no “opt out” option if Social Security is your only income. The offset is authorized by law, and it happens regardless of hardship.

Can Bankruptcy Stop Social Security Garnishment for EIDL Debt?

Yes. Filing bankruptcy can stop Social Security offset for EIDL debt, and its often the most effective solution if your facing offset and you cant afford to lose part of your benefits:

Automatic stay stops offset immediately. When you file bankruptcy (Chapter 7 or Chapter 13), the automatic stay goes into effect immediately and stops ALL collection actions, including Social Security offset. If offset has already started, it stops the day you file. Treasury is legally required to cease offset once they receive notice of your bankruptcy filing.

Discharge eliminates the debt. If you successfully complete your bankruptcy and receive a discharge, the EIDL debt is eliminated (as long as it wasnt obtained through fraud). Once the debt is discharged, theres nothing to collect, and the Social Security offset ends permanently. You receive your full benefit going forward.

Timing considerations. If your Social Security is about to be offset or has just started being offset, filing bankruptcy quickly can minimize how much you lose. Every month you delay is another month of offset. If you file bankruptcy within a few months of offset beginning, you might only lose a few hundred dollars total. If you wait years, you could lose thousands before the bankruptcy stops it.

Qualification and costs. To file Chapter 7 bankruptcy, you must pass the means test (your income must be below your state’s median income or you must have minimal disposable income after allowed expenses). If your living on Social Security as your only income, you almost certainly qualify for Chapter 7 because Social Security income is generally NOT counted as income for means test purposes. Bankruptcy attorney fees might be $1,500-$3,000 for Chapter 7, which can be a barrier if your on a fixed income—but many bankruptcy attorneys offer payment plans where you pay the fees over a few months before filing, or they might charge lower fees for simple cases.

If Social Security offset is happening or about to happen and you cant afford to lose any part of your benefits, consult with a bankruptcy attorney immediately to evaluate whether bankruptcy is your option.

What Should You Do If Your Facing Social Security Offset for EIDL Debt?

If you’ve received notice that your Social Security will be offset for EIDL debt, or if offset has already started, here’s what you should do:

Step 1: Verify the debt is correct. Make sure the debt being collected is actually yours, the amount is accurate, and its not a case of mistaken identity or incorrect calculation. If the notice says you owe $200,000 and you only borrowed $100,000, or if its a debt that was already paid or settled, you have the right to dispute it. Send a written dispute to Treasury within the timeframe specified in the notice (usually 30-60 days), explain the error, and provide documentation. Treasury must investigate and verify before continuing offset.

Step 2: Evaluate whether bankruptcy makes sense. If the EIDL debt is substantial and you have no realistic way to repay it, and losing part of your Social Security each month is causing or will cause financial hardship, bankruptcy might be your option. Consult with a bankruptcy attorney (many offer free consultations) to determine whether you qualify for Chapter 7, what it would cost, and whether bankruptcy makes sense for your situation. If the debt can be discharged and the offset stopped, bankruptcy might provide the permanent relief you need.

Step 3: Contact Treasury to explore payment plans. If you dont want to file bankruptcy but you also dont want automatic offset, contact Treasury (the contact info should be in the offset notice) and propose a voluntary payment plan. If you agree to make monthly payments that are acceptable to Treasury, they might agree to stop the automatic offset and rely on your voluntary payments instead. This doesnt reduce what you owe, but it gives you more control over when and how much you pay.

Step 4: Understand that offset will continue until resolved. Social Security offset doesnt stop on its own. It continues month after month, year after year, until the debt is fully paid, the debt is discharged in bankruptcy, or you stop receiving Social Security (death or switching to another benefit that’s not subject to offset). If the offset is $100/month and you owe $50,000, it will continue for 500 months (over 41 years) unless you take action. Dont assume it will just go away after a few months—it wont.

Step 5: Adjust your budget to account for reduced benefits. If your not going to file bankruptcy and your not going to negotiate a different arrangement, you need to adjust your monthly budget to reflect the fact that your Social Security benefit will be 15% less (or whatever the offset amount is). Cut expenses where possible, explore programs that help seniors with limited income (housing assistance, SNAP, utility assistance, prescription drug assistance), and live within your new reduced income. Its not ideal, but if offset is happening and you cant stop it, you have to adapt.

Talk to an SBA Debt Attorney Today

Losing part of your Social Security benefits to EIDL debt collection is devastating, especially if your living on a fixed income and already struggling to make ends meet. But Social Security offset CAN be stopped through bankruptcy, and in many cases bankruptcy makes sense for seniors with dischargeable debt and limited income.

Our firm helps clients facing Social Security offset for SBA and EIDL debt. We evaluate whether bankruptcy is appropriate and whether you qualify for Chapter 7. We file bankruptcy to stop Social Security offset and discharge EIDL debt. We negotiate with Treasury on payment plans when bankruptcy isnt the right option. We challenge improper offsets when the debt is incorrect or the offset amount violates the $750 floor protection. And we advise on protecting assets and income during federal debt collection.

If your Social Security is being offset for EIDL debt, or if you’ve received notice that offset will begin, contact us today for a free consultation. We’ll review the offset notice and verify the debt is correct. We’ll evaluate whether bankruptcy would stop the offset and discharge the debt. We’ll calculate what bankruptcy would cost versus what you’d lose through continued offset. And we’ll advise on the strategy to protect your Social Security benefits and resolve the debt. The consultation is free and confidential, but it could be the difference between losing part of your Social Security for years and stopping the offset permanently.

Your Social Security benefits might be your lifeline—dont let them be garnished without exploring your options. Call us now.