Student Loans are becoming an ever growing headache with simply no end in sight. With cost of education consistently increasing and the number of jobs that require such skills not reflecting this pattern directly leaves immediate college graduates unemployed and thus struggling to pay back loans. Unfortunately, there is no escaping a student loan – claiming bankruptcy only on your student loan is simply not an option; you will still eventually have to pay it back even if you take the undue hardship route – however this decision is really up to the bankruptcy court. Also, student loans can almost never be included if you file for Chapter 7 or Chapter 13 – undue hardship is really the only approach to this.
Life isn’t so complicated if you default (the length of time you have not made a payment) on your federal student loans as the penalties are very straight forward; without even taking you to court, government can seize your tax refund, social security benefits, professional licenses – they know what they are doing and will never need to emotionally harass you for the money.
However, when it comes to defaulting on private loans, well, let’s just say you want to avoid this as much as you can; the definition of “default” is subjective to the contract you have with the lender when it comes to private loans – it can even be as bad as missing one payment. When it comes to debt collection, private lenders simply do not have the same privileges the government does. Because of this, they give their cases to debt collectors in exchange for a share of the money you return.
There are some things about these debt collectors you must be aware of. They are known to use very immoral and nasty tactics. What you need to know is that they cannot harass, mislead, or lie to you.
Because of Fair Debt Collection Practices Act (FDCPA), a debt collection agency cannot legally harass, mislead, or lie to you; you can in fact take legal action against them for doing this. For example, they may say, “we have the legal right to garnish more than 15% of your wages without judgement” or “we have the right to garnish your social security income” when in reality they simply cannot; they can only take up to 15% and anything above this needs a judgement and various federal benefits, including social security, are exempt from garnishment. They may tell you that you have committed a crime or threaten to get you arrested. Do not give in to these threats – police will come knocking on your door if there was an arrest warrant out for you. Also, they cannot seize your assets so don’t be bothered by these threats.
In a lot of instances, debt collection agents have been known to pose as government officials to say that they have a judgement against you; do not fall for it immediately and wait till you receive official notification in writing.
They are also known to reach out to your friends, family, and even employers; they simply cannot do this and in fact this is a huge point to sue them over as it is clearly harassment – but also embarrassing on your end.
The good news is that you are protected from all of this and you can even fight back by filling a lawsuit. These agencies know that dealing with a default is a stressful time and they know using assertive tactics can pressure you to take drastic measures.
Try to not enter this scenario by all means necessary now that you know how miserable life can be if you default. Defaulting on loans have horrendous consequences which we will discuss in another post.
For now, visit the Federal Trade Commission Website to understand the concept in further details.
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