Tax Time Q&A: Can the IRS Seize My Tax Refund to Apply Toward My Student Loan Debt?

Wesley H. Bain, Jr.'s Debtor and Creditor Legal Blogs

Licensed for 10 years

Attorney in Omaha, NE

Wesley H. Bain, Jr.

Free initial consultation, Fixed fees available

Serving Omaha, NE

  • Serving Omaha, NE

  • Free initial consultation, Fixed fees available

Attorney at firm Hicks & Alhejaj, P.C.

Serving Omaha, NE

Free initial consultation, Fixed fees available

Early February is the time of year when Punxatawney
Phil sees his shadow, men panic about what to buy their betrothed for
Valentine’s Day, and the go-getters get their tax returns done so they can get
their refund back as soon as possible However, some taxpayers are discovering
the refund they thought was coming has instead has been seized to pay their
student loan debt.

What?! Why?!

If your federal student loans are in default (which,
by definition, means you are delinquent by 270 days or more), the Department of
Education can take your tax refund using the Treasury Offset Program. This
program authorizes federal payments, such as tax refunds or Social Security
income, to be intercepted in whole or in part to pay debts owed to other
federal agencies.

What
You Can Do if Your Refund Was Seized.


Under federal law, if you have student loans in default you will be notified in
advance that you are at risk of having any potential tax refunds seized and
applied to your oldest student loan or loans. The notice you receive will have
information for you to review your loans and how you may avoid an offset.

If your refund is taken, you can request a hearing.
If it was seized in error, the money may be refunded. However, claiming you did
not receive proper notice is insufficient. In order to reverse the seizure would require that you prove your
student loan was not in default to begin with.

If you ARE in default then you will not have a good
case to recover the funds. Your
attention will need to turn toward getting those loans out of default. There are many payment options available and,
perhaps, an income-based repayment plan would benefit your budget. In some cases, income-based plans can be set
as low as $0 per month. If your circumstances
are such that you will never be able to repay all of your student loans, it may
be possible to discharge them in a bankruptcy case if you can prove an “undue
hardship.” The bar is set very high to
determine if you may qualify for undue hardship, but consulting with an
experienced bankruptcy attorney at Pollak, Hicks & Alhejaj can help you
determine if this option is available to you.

We encourage you to seek help before it is too
late. If you are expecting a large tax
refund and it is taken by the government, chances are you will find yourself
dealing with high stress, anxiety, even panic. Student loan default will not only disrupt your budget, but it will harm
your credit and cost you hundreds and thousands of dollars of extra debt over
your lifetime. Call us for a free
consultation to see what debt relief options may be right for you.

 © Wesley H. Bain, Attorney at Law

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