Garnish IncomeTax after loan sold to collection agency

My student loan is in default. They are taking my share of income tax return every year. They have sold my loan to a collection agency. I would like to pay it back but I am scared to do this sine they got smart when I told them I wanted the terms in writing. They Also contacted my employer getting me in trouble. They said they were going to do that again, and also take my income tax return. Can they do this?

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Apr 19, 2010
Can income tax refund be taken to repay defaulted student loan
by: Mary

Thanks for submitting your debt collection question on our Q&A page.

Sorry to know that you defaulted on your student loan. Unfortunately, the IRS will continue to intercept (take) your income tax refunds until the balance due on that loan has been paid in full.

If you would like to repay the balance due on your student loan and the collection agency is unwilling to put the terms of your repayment in writing, I suggest that you put the terms you propose in writing yourself and mail your letter via certified mail with a return receipt requested to the agency. (Make a copy of your letter before you send it.) The letter and return receipt will help you create a record of your efforts to pay off your debt and could be helpful to you if you have to take legal action against the collection agency at some point.

I am not sure exactly what you mean when you write that the collection agency got smart when you told it that you wanted to pay back your loan and wanted the terms in writing. You should know however that the federal Fair Debt Collection Practices Act (FDCPA) prohibits debt collectors from using obscene, profane or abusive language when speaking with you so if that happened, the debt collector violated the law.

Also, it also appears from what you have written that the agency violated that same law by contacting your employer about the money you owe and by threatening to contact your employer again.

I would suggest that you do two things right away. First, familiarize yourself with your federal debt collection rights by purchasing a copy of our e-book Debt Collection Answers. You can read the first chapter of Debt Collection Answers online for free.

Second, contact a local consumer law attorney with experience in debt collection cases. Find out how to get FREE or low cost legal advice about debt collection from a consumer law attorney here.

Good luck and let us know how your problem turns out.

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