Defaulted student loans

by Mike
(Phoenix, AZ)

Can collection agency take your car if it's your sole transportation?

Comments for Defaulted student loans

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Dec 04, 2011
Defaulted student loans

In Arizona a vehicle with a fair market value of $5,000 or less is exempt from collections. In other words, if the resale value of your car is no more than $5,000 it cannot be taken from you to pay a debt. If it is worth more than that in today's market, then your car could be at risk, even if it's your only vehicle, but you would have to be sued first for the money you owe and the court would have to give the agency permission to go after your car. If you believe you are at risk for being sued, you should consult with a consumer law attorney in your area right away.

You should be aware however, that there are many other ways that a lender or DOE can collect past due federally-guaranteed student loan debt. For example: You may be sued so that your wages can be garnished, so that liens can be put on assets that you own (When there is a lien on an asset, the asset cannot be sold or transferred to someone else until the amount of the lien is paid off.); or so that money can be taken from your bank account. Also, the IRS may begin taking (intercepting) any federal income tax refunds you may be entitled to and applying that money to the debt. In addition, the fact that you've defaulted on your student loans will damage your credit history and lower your FICO score.

Meanwhile, as long as your student loan debt goes unpaid, it continues to increase due to interest and penalties. And, it is one of the only kinds of unsecured debt you cannot get rid of in bankruptcy.

You are stuck with the debt unfortunately, like so many other individuals these days who find themselves unable to pay their student loans, and so you need to try to figure out how to pay it off if at all possible. I recommend that you go here to read about your options. Hopefully one of them will work for you.

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