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I have a question regarding student loans and total and

permanent disability cancellation.If I file...
I have a question regarding student loans and total and permanent disability cancellation.If I file and get approved for total and permanent disability discharge for my federal student loans, I will be subject to a 3 year monitoring period in which I cannot earn more than about $15k per year through employment. If I receive an injury settlement which would include lost wages, and if it exceeds $15k, would that be considered income from employment?The accident happened in 2015.Since lost wages are taxable income, would the department of education consider this is employment income during the 3 year monitoring period?
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Answered in 37 minutes by:
9/26/2017
Gerald, Esq
Gerald, Esq, Lawyer
Category: Legal
Satisfied Customers: 4,303
Experience: 30 years of experience
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Hello,
Thank you for using Just Answer. Please bear with me while I review your question. I will respond fully shortly. Thank you for your patience.

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Hello,

Thank you for your patience and thank you for using Just Answer. I want to provide you the best service I can. Please feel free to ask any follow-up questions you have.

I am an attorney with 30 years of experience; I hope to provide you information that will help you in resolving your question.

A personal injury settlement for your injuries is not income. The portion for lost wages is considered income - at least for income tax purposes. BUT it is not considered "earned income" in that were not employed to earn it. Rather it is compensation for your inability to earn income.

It does not count as income for Student Loan purposes. It does NOT count as income for disability payments. However it may increase your assets. If the disability is through SSI then it can affect the asset limits.

Also be careful for Subrogation Claims. Subrogation claims come from third party payers (like insurance companies and government agencies. They are claims for reimbursement of money paid to you because of the injuries you received. Talk to your attorney about structuring the settlement to minimize such claims.

I hope the information I provide is useful to you. I want you to be comfortable and satisfied with my attempt to assist you. Please, if you have ANY follow-up questions, feel free to ask.

If you ask a follow-up question and I do not respond immediately, it is because I am temporarily unavailable. I promise to respond as soon as I return. Please note that I am often unavailable Friday evening through Sunday.

Please do not forget to give me a positive rating. It adds nothing to your costs but helps me greatly. Thank you.

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Good luck.

Please note: Information is educational and not given as legal advice. Only your local attorney can give legal advice. I can't establish or accept an attorney-client relationship with you. All posts are available for public viewing.

Kind regards,

Gerald

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Customer reply replied 1 month ago
Thank you for the very informative and detailed response. I have one follow up question. So the department of education cannot reinstate my discharged student loans during the 3 year monitoring period if I receive compensation for lost wages, correct?

That is correct - BUT why not delay receiving the settlement. There are all sorts of ways to structure a settlement so that you avoid the possibility of the DOE making a claim. I spent several years on the collection side of these issues and the collections policies were more intent on getting a judgment or garnishment Order.

Even if DOE ultimately loses (as they should) you may still have to do battle with them. When does the three years expire?

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Customer reply replied 1 month ago
How does delaying receiving the settlement help me? When would be a good time to receive the settlement? Also, you mentioned "getting a judgment or garnishment Order". Do you mean the department of education can get a garnishment order?
Customer reply replied 1 month ago
I haven't even applied for a discharge yet. I'm just asking hypothetically.

1) If you receive the discharge and delay receiving your settlement money until after the three years. OR even better have the settlement structured so that you get a smaller amount during the three years then you avoid the income issue.

2) Yes, the Department of Education can seek to Garnish your income to collect on Student Loans. They can also sue to obtain a judgment and use that judgment to attach your assets.

3) If you believe you are eligible for the discharge you should apply as soon as possible.

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Customer reply replied 1 month ago
I called Nelnet, the company that handles disability discharges. They told me that income from my settlement and lost wages is considered "unearned income", therefore it would not count towards the maximum amount of income I'm allowed to earn through employment. If I'm granted a discharge, what right does the department of education have to sue me if my settlement and lost wages compensation is considered unearned income, thus not counted towards the $15k per year limit?

Good. That is what I told you. That it was unearned income.

But you should still talk to your attorney about structuring the settlement. It may not be necessary but it is a good conversation to have.

DOE can consider the assets that you hold in deciding to pursue the loan if it has not yet been discharged.

Gerald, Esq
Gerald, Esq, Lawyer
Category: Legal
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Experience: 30 years of experience
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Customer reply replied 1 month ago
Do you mean post discharge monitoring or the initial discharge once my application is approved?

Neither.

The Servicer (in your case NelNet) reports to DOE on cases that are in default. Yours would be one of those cases. It is possible (not likely but possible) for DOE to do audits and review cases. If they see that you have assets that can be applied to the student loan debt they have the authority to pursue those assets if the debt has not yet been discharged.

I am providing you this information so that you can discuss it with your personal injury attorney. Simply as a safety measure to make sure if you do settle your personal injury case you do so in a manner to make sure you protect and keep your settlement. I am not trying to scare you, just trying to make sure you are fully prepared.

Kind regards,

Gerald

(Please do not forget to rate me – click the five stars. It adds nothing additional to your costs, but it helps me greatly. Plus it is good Karma for you. Thank you.)

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