Bankruptcy Law Questions? Ask a Bankruptcy Lawyer Now.
I am a bankruptcy attorney and I would be happy to assist you. Pursuant to 15 U.S.C. 1692c(c), if a consumer advises a debt collector in writing to cease and desist all communications, or that the consumer refuses to pay the debt, then the collector must cease all communications with the consumer except for a few limited purposes - to advise that the creditor intends to invoke a specific remedy or to advise the consumer that the collector has closed the account. This is why she did not receive any communications from the collection agency. The letter did not actually stop the ability to collect the debt. The offsets may have stopped for a multitude of reasons, such as the amount that was taken from her refund satisfied the department of education minimum payments. For example) if a minimum payment is $120 a month, then they would have spread the $8,000 out over about 66 months. Thus, there were no more offsets until the 66 months passed. The whole time the Department of Education was still accruing interest. The $8,000 could not be applied as a single payment unless you had requested at the time it was taken that it count as 1 payment.
They are now transferring the collection back to the Department of Education (DoE), since the DoE has powers normally collection agencies do not. The DoE can take a person's entire social security disability check to pay back defaulted student loans, until it the debt is paid off. They can take 15% of social security retirement checks. Most people are shocked to find that out! I have personally seen it happen to some clients. The government has the right to take money they would pay you, since you owe that money back to them. They can 'off set' as you call it her payments, even with a cease and desist on file. The cease and desist only prevents you from receiving a normal statement regarding how much is owed, how any money the take is applied, the balances and interest, as well as prevents communications between the DoE and the debtor. I recommend writing a letter withdrawing the cease and desist. There are 2 reasons for this. The first is so you/your mother can actually chat with the DoE and begin communications again. The second is so she can negotiate a repayment plan, instead of the alternative; them merely taking her entire social security check. Most persons don't realize that if you call the DoE, they have MANY options available for repayment. Some plans for repayment are income based, others are deferment for hardship. These options require the debtor to talk directly to the DoE or the lender (ex-sallie mae) and ask for options and you must indicate a willingness to pay back the money. They will not initiate conversations about repayment plans; you must do this. In conclusion, I would recommend you immediately contact the DoE directly and ask what repayment options she has and if there are any forms available to do an income based or hardship repayment plan. If the DoE says you need to withdraw your cease and desist letter so they can talk to you, then go ahead and do that. An income based repayment of perhaps $50 per month is a much better result than losing a large portion of her social security check.
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