I sold a house on land contract. I wanted to know if it is possible that a lien from a government education loan in default could be attached to this property, and does this jeopardize my equity? I should be in first position when the house finally gets sold, right? So even if the house had a lien attached to it, I should get what I am owed first in the event of a payoff or sale.... is this correct?
Residential Real Estate Agent · OH · Member since 2008 · 553 posts · 24 votes
19y
The Feds are always in first posistion
Looks like to me they can lien the property but consult a good lawyer
Government Collection Procedures on Defaulted Student Loans
The Higher Education Technical Amendments of 1991 (HEA) eliminated all statutes of limitations for any collection action by a school, guaranty agency, or the United States under a federal loan program. The amendments also eliminated all limitation periods for tax intercepts, wage garnishments, and other collection efforts.
If you’re not able to discharge your student loans in bankruptcy or establish a repayment plan in a Chapter 13 proceeding, the federal Department of Education has the right to:
Tack collection fees of 25% and collection agency “commission” fees of approximately 28% onto the principal, interest and penalties you already owe
Take your federal income tax refund until all your defaulted student loans have been paid
Garnish up to 10 percent of your wages, without suing you first
Take as much as $750 per month (up to 15 percent of your income) in federal benefits to which you might be entitled, including social security retirement and social security disability income, and apply that amount toward your outstanding defaulted student loan debt
Sue you for your outstanding student loan debt and place liens on your property
Student loans are not dischargeable in bankruptcy unless you can show that your loan payment imposes an "undue hardship" on you, your family, and your dependents. Non-dischargeable debts are those debts that you cannot totally eliminate when you file for bankruptcy and will have to be paid by you.
It is almost impossible to show an undue hardship unless you are physically unable to work and the chances of your obtaining any type of gainful employment in the future are non-existent.