The Wall Street Journal is reporting that a provision in the 2008 Farm Bill lifted a ten-year statute of limitations on the government’s ability to withhold Social Security benefits in collecting debts.
The change will add more than $6 billion to the $75 billion in delinquent debt individuals owe the government, according to the Financial Management Service, the Treasury’s debt collection unit.
This means that a person who defaulted on a small-business loan in 1995 and who is receiving Social Security could be notified that his benefits may be reduced each month until the debt, with interest, fees, and penalties, is paid. The Treasury can withhold 15% of the benefit, though it can’t be reduced to below $750. Tax debts have no floor.
The WSJ notes that while the shift applies to debtors of all ages, seniors receiving social security will bear much of the brunt.