A Veteran on Medicare got hit with a big, surprise medical bill and needs guidance.

I am a 72-year-old Vietnam Veteran, and I’ve just run into a problem with a very large medical bill because of cancer care incurred at a Military Hospital. They accepted me as a patient knowing that I only had Medicare, but they neglected to tell me about the costs. Now I’m not sure where to turn. They said the debt was sent to a Department of Defense Collection Agency, so who can I turn to for assistance and guidance? I’ve been trying everything I could think of, but I get no responses. Please help!

—Anton A.

Eric Olsen, Executive Director of HELPS Nonprofit Law Firm, answers…

Hi Anton,

With few exceptions, federal and state laws protect Social Security, Pensions, VA benefits, and disability income. It can’t be garnished or taken.  However, federal agencies such as the SBA, VA, FHA, military credit unions, and including a Department of Defense Collection Agency can request an offset of 15% of Social Security benefits for debts owed to these agencies.

The IRS and government-insured student loan lenders can also offset 15% of Social Security after a 60-day notice.  However, there are laws in place whereby lower-income seniors can prevent or stop an offset for IRS taxes and past-due student loans.

Unfortunately, there is no procedure to stop an offset for a debt owed to one of these other federal agencies because of financial hardship.

Options to avoid Social Security offsets

One of the main concerns for seniors, when they face debt collections, is whether the collector would be able to offset their Social Security benefits.

Q:What is a Social Security Offset and why does it happen?

A: Social Security offset is like wage garnishment in that it takes a portion of the benefits disbursed to you by the Social Security Administration. For many seniors, Social Security benefits are their primary source of income in retirement.

In 1996 Congress passed the “Debt Collection Improvement Act”. This law tells federal agencies how to collect their defaulted debt by Social Security offset.

Only a minimum of $750 Social Security is protected from an offset, and this hasn’t changed since 1996. Furthermore, Congress eliminated the statute of limitations in 2014 for debts owed to federal agencies.

Because of this, seniors can face a 15% federal agency garnishment from their Social Security, decades after a debt went into default.  The results of this can be draconian. HELPS has had widows contact us who had their Social Security offset for a federal debt over 40 years old. A senior whose only income is $900 per month in Social Security could be offset, leaving them only $765.  HELPS is actively working to get the law changed.   We are hopeful for some good news soon.


The good news is that offset of Social Security for agency debt has been temporarily stayed during COVID.  Before COVID it didn’t happen that often, but we were starting to see more cases of it.  Still, the Department of Defense Collection Agency may never attempt to offset your Social Security.

If they were to start an offset, the debt could be eliminated in bankruptcy. Depending on your assets and whether they would qualify for exemption in the state where you live, this can be an option to deal with medical collections. That way, you won’t need to worry about offsets due to this one big medical bill.

Another option to avoid offsets if you don’t want to declare bankruptcy would be to consider paying a token amount. Even an amount as low as $5-10 per month might be enough to prevent them from requesting an offset of Social Security. If you decide to do this don’t call them, just send them a little bit each month.

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About the Author

Eric Olsen

Eric Olsen

Eric Olsen is an attorney with more than forty years of consumer law-related experience. Born and raised in the Pacific Northwest, Eric graduated from the University of Oregon Law School. He founded the area's largest consumer bankruptcy firm and has filed 40,000 bankruptcies. Eric counseled with many lower-income senior citizens during this time. Because their income and assets were protected from collectors, he told them bankruptcy was not necessary. But harassing debt collection calls and intimidating demand letters made their lives miserable. Eric was very familiar with the federal Fair Debt Collection Practices Act. He knew debt collectors could not directly communicate with a person represented by an attorney. There was no national organization representing the specific needs of the 40 million lower-income American seniors. So Eric left the law firm he founded in 2015 and started Help Eliminate Legal Problems for Seniors, HELPS. HELPS is a charitable 501 (c) nonprofit law firm that represents seniors and disabled persons ongoing in all 50 states to prevent unwanted collector contact.

Published by Debt.com, LLC