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Defenses against tax return seizure over a defaulted student loan

Student loans, like any type of monetary loan, have to be paid back. The only difference is that unlike a regular loan, a student loan is often not dischargeable during bankruptcy proceedings. Even worse, if the student loan borrower falls into delinquency and then default, he or she could face some serious difficulties.

One of the most financially painful things that can happen to a student loan borrower who falls into default is to have his or her tax return seized. The Internal Revenue Service gets a list of people who have defaulted on their student loans each year from the Department of Education. The IRS will automatically seize the tax refund of the defaulted loan holder and use it to pay down the loan holder's debt.

If a tax return is seized, the borrower will have the ability to appeal the seizure with one of numerous defenses. Those include:

-- The loan was already repaid

-- The loan is currently being repaid through a negotiated payment plan

-- The loan has been cancelled, is in forbearance or deferment

-- The borrower suffered a total or permanent disability or has passed away

-- The loan in question is not the borrower's

-- The loan cannot be enforced due to a forged signature or fraud

-- The school needs to pay a refund to the borrower

-- The school of the borrower closed

-- The borrower was not appropriately certified for his or her loan eligibility

-- The loan has been discharged through bankruptcy or the borrower filed for bankruptcy.

In addition to having one's IRS tax return seized, Kentucky residents could also have their wages garnished, have their professional licenses revoked, get sued or have their federal benefits taken for failure to pay back student loans. As such, any borrower who is at risk of failing to pay his or her student loans may want to speak with a qualified bankruptcy attorney immediately.

Source: FindLaw, "Consequences of a Student Loan Default," accessed May 06, 2016

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