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Lucy, Esq.
Lucy, Esq., Attorney
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Experience:  Lawyer
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RE: a government student loan, rcvd letter from ECMC saying

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RE: a government student loan, rcvd letter from ECMC saying they'll garnish wages. The loan is with a collection agency. Original amt over 5,000, now over 9,500. If I make payment arrangements can I negotiate this amount down? If they garnish and take up to 15% of each paycheck, is this until the whole amount is paid? Since a collection agency is involved is there a statute of limitations since the government no longer has the loan? Can they take money from my IRS refund and Social Security? Can you tell me what my options are? I have only about 30 days to respond.

My name is XXXXX XXXXX I'd be happy to answer your questions today.

A statute of limitations applies to how long a person has to file suit. That means that, if they're collecting on a judgment, the statute of limitations is not relevant. The wage garnishment will continue until the debt is paid in full, or the judgment expires. A judgment is good for six years, and it can be renewed for another six years. So, they could theoretically take 15% of your wages for 12 years, since they will be adding interest each month. They are also allowed to seize tax refunds, or levy money held in bank accounts. Student loan debt is one of the very few situations where a creditor may garnish social security. Student loans also unfortunately cannot be discharged in bankruptcy.

Most collections companies will negotiate with you, but may require cash now to accept a lesser amount. They do not have to negotiate or settle, but there is nothing that prevents a person from trying to negotiate an agreement.

There are a few options - one is to see if they'll accept a small cash sum now to make the whole thing go away. I've seen collection companies accept half the total, or less, for immediate cash instead of a promise of monthly payments. Another option is to set up a payment plan to avoid going to court. Each payment will reset the statute of limitations. You also have the option of forcing them to go to court and prove the amount owed.

If you have any questions at all about what I've written, please reply so that I may address them. It's important to me that you are 100% satisfied with the service I provide. Otherwise, please rate my service positively so that I get credit for helping you today. Thank you.
Customer: replied 4 years ago.

Hi Lucy, Thanks for the information. I never was given a judgement on this, can they garnish wages without a judgement. 2nd I noticed on my credit report that part of my loan was insured and the other part wasn't. The report said that the insured part was being paid for by insurance. The amount they're showing I owe is showing both the insured and the uninsured. can I negotiate because the report shows the insured is being paid by insurance or do I still owe this anyway?

A collection agency needs to get a judgment before they can garnish your wages. That means that they have to serve you with notice of the suit, and give you an opportunity to show up and defend the case.

If you show that insurance has paid part of the loan, you can try to use that to negotiate, since they're not out that money (and the collection agency only pays pennies on the dollar, so they've spent very little on this loan).
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