Can the government take your house if you can't pay student loans?

[shengmei]

Hubby and I both have a ridiculous amount of very expensive education. Hubby now earns 60K a year, which sounds like a lot but 80% of that goes to rent. I am disabled and cannot make any money right now.

We own two houses in Texas that we purchased for 20K each. I wonder if the government can place a tax lien on it if we cannot pay student loans. Lately I saw on the news a lot that banks had been able to buy houses for as little as 100 because they bought a tax lien.

[disneysteve]

Hubby now earns 60K a year, which sounds like a lot but 80% of that goes to rent.

Your rent is $4,000/month! What the heck are you renting?

[shengmei]

I meant 80% after taxes and student loans. The rent is $2000 a month. We recently gave up the car. We live in LA.

[disneysteve]

I don't know the answer to your question about whether or not they can put a lean on your property. I have to wonder, though, if you have so much debt and live in LA, why not just sell the houses in Texas and put that money toward your debt?

[97guns]

i dont know if they can attach the house either but you can have hubby quite claim the properties to his parents then they can put it in their will/trust back to hubby when they pass.

[jpg7n16]

I meant 80% after taxes and student loans. The rent is $2000 a month. We recently gave up the car. We live in LA.

Nonetheless, your rent is still too high for your income. Should be somewhere under $1400. Likely around $1200-1300 max. (28% of after tax income)


And the SL issue doesn't matter if you continue to pay on time. If you are unable to pay, you should sell the properties well before filing bankruptcy anyways.

Bankruptcy laws regarding your property vary by state, so you'd have to consult with a local bankruptcy attorney to determine how it applies to your situation. I know states have certain homestead exemptions, but I don't know if they apply to properties you own but do not live in.

Bankruptcy Exemptions, 50 State Homestead Exemption Laws, Asset Protection Laws :: LegalConsumer.com

[dczech09]

I am not sure why bankruptcy has been brought up. Student loans cannot be discharged in a bankruptcy, so filing would not really do any bit of good.

You should either sell the properties and use the proceeds to pay your debts. If you are dead-set on keeping the properties, then transfer them to your relatives or 1037 exchange to a corporation or LLC. The 1037 exchange is complicated, so that is really just a last resort.

As far as I know, student loans are usually Federally insured. This means that the creditor will not discharge them in bankruptcy because they will get the money no matter what. The only way the government would intervene and pay off your debt is if you pass away and there is no one/no assets to cover the debt.

The government would not be the one to come after you. In all likelihood, it would be the servicing creditor. I am pretty sure they can garnish wages, but that requires court approval. As far as liens, I highly doubt that would happen in the short-term. A lien probably would be an absolute last resort. And even if a lien could be applied, you would have other issues aside from the lien to be concerned about.

There would be wage garnishments and court appeals LONG before any lien could occur.

Also, Texas is a homestead state, so that may affect a lien possibility. I am not an attorney, so I don't know for sure.

[disneysteve]

Nonetheless, your rent is still too high for your income. Should be somewhere under $1400. Likely around $1200-1300 max. (28% of after tax income)

OP states she is disabled, so she may have income as a result of that. We don't know. If husband's is the sole income, then I certainly agree. Actually, if that is the sole income, I don't know how they are surviving. if $2,000 is 80% of the take home pay after taxes and student loan payments are taken out, that only leaves $500 to cover everything else - food, utilties, clothing, transportation, medical care, etc. And if they own 2 houses in Texas, there must be expenses associated with that. I don't see how $500 could possibly cover everything.

[josetann]

They can definitely put a lien against the house(s). If you're currently living in them, then they can NOT sell it out from under you. But if you're not living in them, I dunno...I think they might be able to. You should have plenty of notice though, it wouldn't be a quick process. I think they'd have to first notify you that you're late, then that you're in collections, then they have to sue you (and serve you), IF they get a judgement against you THEN they can start levying accounts/garnishing wages/putting liens on property. If they were able to force a sale of the property, it'd be after all that already happened.

But ask a lawyer...don't rely on us for legal advice

[GrimJack]

As long as you are current on your student loans, you probably shouldn't worry about the houses. From what I have seen, once you default all sorts of problems accrue including a dreaded 'F' code on your IRS tax account; the 'F' stands for 'possible Financial Management Services' claim on your refund. Each year, if you are due a refund the computer checks to see if you owe back taxes then it checks to see if you have a non-IRS debt (back child support, defaulted stud. loan, state taxes, that sort of thing) and if there is anything left, you get your check.

Actually, it is not 'dreaded' - it is just a code that all CSRs have to bring up during a call if they see it to ensure that all issues are covered in a call.

[jpg7n16]

I am not sure why bankruptcy has been brought up. Student loans cannot be discharged in a bankruptcy, so filing would not really do any bit of good.

That's not entirely true.

Student Loans & Bankruptcy | Student Loan Borrower Assistance

[GrimJack]

That's not entirely true.

Student Loans & Bankruptcy | Student Loan Borrower Assistance

Not entirely true "But under a 2005 law passed by Congress to protect lenders, private student loans fall under the same nearly-impossible-to-clear category as child-support payments and criminal fines."

Student Loans and Bankruptcy