Subject-----Dealing with stubborn debt ----Student Loans, IRS Claims, State Tax Claims
Although I am retired now, I worked for years as a financial professional helping people who had primarily IRS problems. Many times, the same person had a Student Loan as well and perhaps some State Tax Claim to deal with.
These three types of debts are difficult for anyone to deal with. Student Loans are extremely difficult to bankrupt out on, IRS Claims have onerous penalties plus interest that so often seems insurmountable and State Tax often has no time limit for collections, onerous penalties and punitive interest rates making a solution to any mix of these practically impossible. One would have to slave away for many years just to deal with one of these issues but in helping folks with their IRS problems, I witnessed numerous clients who, once knew there was a way out of IRS problems, crafted and executed long term plans to clear everything. Obviously, if one has a serious IRS problem or Student Loan default problem, the credit record is very screwed up and will be indefinitely. However, this mere fact did not deter some of my clients. It was all a matter of understanding priorities, rules, and interpretation of law. I do not make recommendations of how to deal with these debts anymore, but here is a story or two of how it was done.
IRS bill 5000
Student Loan 33500
Student Loan was ready to come out of deferment and the client had little income to deal with it.
He talked to me quite a bit about what agency could do what and how long it took them to take action. He ended up getting 8 credit cards, let them sit empty then one at a time, got cash advances over a period of a few months and made the minimum payments faithfully. All this time, he was paying 100 per month to the IRS to keep them from filing a lien against him in his county which would have immediately trashed his credit report. He called me a while later, almost a year and told me he had used the cash advances to live on so he could pay on his student loan and had completely extinguished his student loan debt. Of course he still owed the IRS about what he started with and had a mass of Credit Card debt. After a lot of questions, he asked for a referral to a bankruptcy attorney. I told him that the IRS debt, since it was more than three years since he filed, could be included in his bankruptcy if he went that way. Certainly it looked like the Credit Card debt could be wiped out by his bankruptcy as well. Sure enough, six months later he was in the clear---except for that BK on his Credit Report. But then, small price to pay.
I often wonder about the right and wrong of things like this, you know the morals of it all. But then, I also wondered about the rightness or wrongness of things like an airline taking bankruptcy to avoid paying pensions and shifting that burden to taxpayers. I further wondered about the morality of bailing out banks on the backs of people like us. But, maybe that was ok, I guess. Anyway, here is one guy who paid off his student loans a few years ago. Now he lives in a nice house, nice family, and is doing well financially.
Current Scores:
MyFico 9/30 EQ 748, TU 702, EXP 685
EQ neg-0, TU neg 60 day late 1 time, EX 3 CA from 2008
MyFico 10/1 EQ 748, TU 699, EXP 685
Applied for two credit cards and car loan, 2 HP dropped the score
