state tax lien showing up 1 month AFTER completing rehap program

[life is good]

Hello and I am so glad you started this thread! Thank you so much!!

Long Story Short; (not really )

I got myself a student loan back in 1986 for around 5K. After a few deferrments, financial hardships, etc...I went back to school and got another one for around 8K, about 8 years later 1994. I have paid some of this off, but not all of it.

I have always let the loan agents decide the best thing to do with regard to my situation and ability to make payments. In 1997, I moved and lost track of everything.

Cut to-

About a year ago, I was contacted to enter into the loan rehab, which I did, and finished this last November. Last April I did not file my income tax return, as I knew there was a lien on it, but I was told it was going to be removed upon completion of the rehab program. (at this point all loans had been consolidated)

I had pulled my credit reports in October of 2011, and saw no public filings or state tax liens...but in January 2012, I saw they had placed a state tax lien on my public filings in DECEMBER 2011!! (in the amount of 1,377)

I also noticed that federal loans put a positive TL on my report, however, it says I am current in a revolving account with a $46 dollar monthly payment on a balance of approx. $6,817. I was making payments to rehab for $157 each month on a balance of over $18K. I am confused here.

Mid December of 2011, I had called them (rehab)because I noticed they had not taken a payment out of my account and they told me I was finished with them and that I would expect some paperwork in the mail as to new lender info, etc., that they would gladly accept a payment IF I WANTED TO make one, but that thier computer system is being revamped and things were taking longer than expected, and I could wait until I recieved the packet. They also told me they were removing the lien from my taxes. (this was before I noticed the lien on my report) I made sure they had all current addresses and contact info for me.

It is now february, and still I have not received anything.

Two questions;

:1. It is going to be 3 months of no payment here...will this cause problems for me; I>E> late payments on my record? I don't want to give any more money to rehab, as I am done with them.

:2. Why did they put this lien on my report AFTER I had completed my contract? I would like to file my taxes in april, but after speaking with a rehab agent, he told me it may take up to 6 months to have effect on the actual removal of the lien. (again, this partiular phone call was made before I noticed the negative TL) I am W2, and am expecting a return; I did call colorado state tax board and they have no record for me; I moved here 2 years ago and have yet to file. Previously lived in California; and they too, have no state tax lien on me. So, it must be from the federal student loans.

It seems like no one can give me any definite answers; only that the computer system is in the process of being updated and is the cause for the delay.

Have you heard about this current "computer updating"?

Any advise is appreciated. I am nervous about how the heck I am going to get this state tax lien removed from my TL.

Thanks, again

[SloanHelper]

Life is good, I believe you originally posted this in my thread and I assume you moved it into your own for the added help.

I know what has happened on some of the account but I have a few questions so I can better understand. Yes the 3 months of no payments is an issue, the tax lien after completion of the rehab does seem to make sense unless you have a loan in default still that was not apart of the $18k balance you were speaking about. Were you with one of the 17 agency's the DOE contracts or the DOE themselves.

I am fully aware of the computer updating thing, which was actually a conversion. If you could please Email me so I can ask some questions I will be able to provide more detailed answers to all of the problems and we will get it all fixed. My email is my same posting name at gmail.com

[life is good]

why would it make sense to put a derrogatory state tax lien on my public filings one month AFTER I completed my rehab?

No, I don't have any other loans; my loans were consolidated years and years ago. I am getting mail for a ful balance, and in addition to that; the rehab place knew about the full balance.

so if I SHOULD keep making the payments; to whom shall I make them?

the rehab?

thanks for the info

P.S. thank you for the invitation to email, but I have learned so much from this open forum, that I would prefer to keep my issues here. Perhaps someone else is having a similar issue; they too, could use the input.

[life is good]

all my loans were.are DOE no privates.

[life is good]

Ok. how about this question;

when the DOE guys put a lien on you; how does it read on one's report? does it simply say, "state tax lien" ?

And when rehab told me they would remove the lien, why then, did they turn around and put a derrogatory on my credit report? At $157 per month, that would seem to be a percentage of the full balance of all- approx. 15K+

I have to get the exact paperwork from the last bill I recieved....but I believe that figure is in the ballpark.

I'm looking at loans 22 years old. If this rehab was just a BS way of collecting, and promising the debtor things they never intend to happen, then WHY on earth would anyone want to do rehab??

Can you answer that for me? THANKS!

[StudLoanGuru]

The rehab program is a legitimate program. Your situation is unique and seems like something went awry within the process.

First thing I would do is call the Student Loan Tracking number(800-433-3243). This will tell you every government loan that is in your name and who to contact regarding it. This will ensure there are no other loose ends that were either never consolidated or not included in the rehab. If nothing else, it will allow you to see who has the account so you can contact them(or pay them).

The next thing to consider is whether or not the rehab got funded. What this means is that the guarantor sells the loan to a new lender, which occurs after 1) the most recent 9 consecutive payments are made, 2) the rehabilitaion agreement letter has been returned (most guarantors) and 3) a new lender agrees to take on the loan. If any of these were not fulfilled and you stopped making payments, then the loan wouldn't have been funded. However, you mentioned earlier you got a letter stating it had. They don't issue those letters until after they have sold you loan, so if you received a letter then this should have gone through.

The next thing to consider is that you mentioned it is only a state tax lien, not a federal tax lien. That makes me think the lien isn't related to the student loan, because if the loan was causing the offset it would be offsetting both the state and federal tax returns.

The bottomline is that if the loan rehabilitated, then it is not the loan that is causing the offset. After the loan rehabilitates there is about a four month period before it can redefault, and even then it would have had to happen before June 2011 because that is the cutoff to be eligible for offset. Then if you get setup before October of 2011 you can still avoid the offset. For you to not only have been setup before October (8 month of program) and funded before the end of the 2011 then that tells me the offset is unrelated to the student loan. If you have proof to the contrary then you should take that up with the loan servicers, or whoever serviced your rehab program.

Now, if the loan didn't rehabilitate, it could be for several reasons. First, they couldn't find a lender before your payments ran out, and once you had a couple months go by without a payment it broke you from the rehab program. Second, your rehabilitation letter was never returned, which is required for the lender to purchase the loan. These are the most common causes for rehab fallout, and this would be able to be verified by whoever serviced your loan during the rehab program.

Now, as for the credit reporting, the guarantors typically report to the credit bureau that the loan is in default, but not if there is a tax offset, so if you are seeing a state tax lien on your CBR, then that again leads me to think the lien is unrelated to the student loan. A quick way to clear this up is to call your State IRS to see who they sent the payment to. You can clear up whether you are on a federal IRS list by calling 800-304-3107 but that list updates daily so they will probably tell you that you "may" be on the list, but it is worth a shot.

Based on the circumstances you have laid out I would venture to guess that the lien is not student loan related, or at lease not because of the rehabilitated loan. Again, best thing to do is contact the company handling the rehab and see what their database is telling them as far as the balance and status of the loan. You can also contact the guarantor obtained from the student tracking num.

Thats the best I got for you without knowing the exact situation, so I hope this helps.

[life is good]

Great information! thank you....I am going to re-check all of this again, and see what is happening here.

I will post as soon as I get some solid info; right now, just wanted to say thanks for the input!

[life is good]

So I checked the mail today and guess what I got!!! A Bill from the Dept. of Education! LOL

It says my lender is the Dept. of ED ; group A, direct consol

interest rate; 3.250%

principal balance; 12,623.87

monthly payment: $89.24 due feb 21, 2012

ok. so, The DOE sent me to FMS Investment Corp. for collections (rehab)..and I completed that, so now; above is my new bill from the DOE.

Could you clarify this for me?

when dealing with FMS; I received a bill last september: (of course i didn't respond because they were taking 155.00 out of my account automatically) this was strange because it was the only one I had received from FMS (I kept it) it reads;

principal balance; $9,685.33

interest; $3,219.65

fees and costs; $3,141.07

Total balance: $16,046.05

The DOE is showing less, so I can't complain....but none of these figures add up to anything I can understand.

I DID go ahead and sign up for a PIN online to get all the details of my loans but that will take 3 days. (AND by the way- I want to tell you how grateful I am that you included phone numbers!!! YOU ROCK!!)

As far as the state tax lien?? Now this is still strange; I called the number you provided; they said there are no liens against my SS# . I called California state tax; nothing; I called Colorado too, nothing. No one has anything against my income tax return. YET, it is on my credit report..and I was told by FMS they had a lien on me. That is why I believed it was from my educational loans.

[StudLoanGuru]

Ok most of that sounds fine. The letter you got recently would be most current status of the loan. As for why the balance is what it is, the funding process of the rehab program actually changes your balance, and here is how:

When the loan defaults, there is a one time collection fee placed on the account, usually between 18-22% of the principle. That is so they don't have to pay the collection agency out of pocket, they pass the fee they pay onto the borrower. Now, during the rehab program all of your payments went to specific parts of the loan. Typically the order of application is 1) back interest, 2) current interest. Once these are both at $0 the rest of the payment then gets broken down towards principle and the fee, mostly going towards principle. As a result, you principle is getting paid off much faster than your collection fee, depending on how much you are paying monthly.

At the end of the program, during the funding phase, the collection fee is then dropped and reapplied at 18.5% of the NEW principle, meaning every payment in the program actually saved you money on that fee.

Once the calculation is figured, then they sell the whole loan (principle + any current interest + NEW collection fee) to the new servicer, in your case Dept of Ed. Once the rehab is funded, the whole balance becomes new principle.

Going back to your letter now, you will notice the principle in the first one was $9k and the principle in the recent letter was $12k. That is PICTURE PROOF that the loan was, in fact, rehabilitated, because the new principle balance is incorporated ALL of the principle, interest, and fee of the old loan.

I don't know if all that above is confusing, but the bottomline is that it is normal for your balance to decrease like that once the loan completes rehab. Saves money monthly too because you now have amortized payment that is lower because you balance is lower.

Now, going back to your tax lien .. if all of the state and federal tax agencies are telling you there is no lien, then I would be surprised if you will have any problem at all getting your tax return back. If there is a lien, however, unfortunately there is little help I can give you, because I am now 100% convinced it is not because of your student loan.

Keep digging into the credit report to see if you can find out who is reporting it. May be worth a call to the credit reporting agency that is reporting it and they can tell you who it is.

Glad we could clear this up for you. Congratulations on your loan rehabilitation, and I hope you have a good day!

[life is good]

StudloanGuru: You ROCK !!!

I appreciate you explaining (which somehow could not be explained comphrehensively by any agents I have spoken with) all of this in plain english.

Everything makes so much more sense, and I don't feel as if I made a wrong choice or was suckered into something. (except for the fact that I will be paying this off for the rest of my life...eeeeeeeek)

There is no statuate of limitations from my loan years, right? cuz if I find out I have just restarted some SOL after 22 years....I will cry, probably forever.

I have paid quite a bit on these loans; pretty close to the loan principal amount....but, I know.....fees, interest, and whatever else they threw on the pile.....ugg.

On the state tax lien;

The only entity that claimed a lien on my income tax return WAS the student loans.....I have nothing else going on that could do that; all my paychecks get taxes taken out, and I am due some sort of refund (didn't file last year, hope to do it this year)But, (duh) I didn't even think about asking the CRA who the lien is from....eeeeeegads...I guess I am so swept up with all my grief from my credit report...it was hiding in plain sight! That will be done first thing monday~ !

One more question;

if I find out it is, in fact, from the student loans...should I just contest with the CRA's? They (FMS) did tell me they would remove it..and if they remove the lien, they aren't reporting anymore to the CRA's....so the CRA's will be inaccurately reporting on my CR...which they will have to remove it at that point...... Would this be a correct scenario?

P.S. LOVE your monkey pic!

Edited February 12, 2012 by life is good

[StudLoanGuru]

Yes, I would dispute it with the CRAs. If there is in fact a report due to the student loan from before then the report is old, and typical procedure for the CRA is to verify it once you dispute it, so in theory they would then get word that the mark shouldn't be on your credit report.

I will add that the reporting on your credit report won't, in itself, offset your tax returns. The only way a tax return can be taken is if a government agency/court order notifies the state and federal IRS to send the return somewhere else. The credit report is just for reporting purposes in the case that you apply for new credit. So, just because it is still on your credit report that you have a lien doesn't mean that your taxes will be offset. However, if by some weird fluke it does get taken it will get sent to the previous loan holder, the one who notified the IRS to begin with. Once they get it, they will attempt to apply it towards your debt, but since they sold the loan during the funding phase of the rehab program, then their system will show a ZERO balance. When that happens, they forward the tax return to you anyway, so in essence you will still get the tax return, but would have to wait an extra six or eight weeks.

As far as the statute of limitiations, you can rest easy knowing that there are no statue of limitations for government student loans, thus you didn't restart anything It is unfortunate that you will be paying on these awhile, but just be vigilant in making sure it is in good standing. Once a loan goes through rehabilitation, if it redefaults then it is not eligible for rehabilitation again, so you would then have a default mark on your credit, possible wage garnishments, and probable tax offsets for the rest of the life of the loan. Don't let that happen! If you run into problems making the payments either get a deferment or reconsolidate into an income based repayment plan. Just be proactive in making sure everything is still fine going forward.

Any other questions feel free to ask!

[life is good]

More good information; and I will keep in mind, I can't do a rehab again. LOL

I will find out tomorrow (hopefully) who and why that state tax lien was put on my report.....I will post this mystery once I figure it out.

Your expertise on this matter has been priceless. Again, my gratitude to you!