When someone owes the federal government a debt, such as student loans or tax debt, the government has more methods of debt recovery than private businesses. For example, the federal government has ten years to recover its tax debt, while the statute of limitations on other debts ranges from four to ten years.
Federal Student Loans
Federal student loans have no statute of limitations on their recovery. The government can garnish Social Security payments to collect on federal student loan debt, though other creditors cannot garnish this income. Federal student loan debt can also be collected from those who signed contracts when under the age of majority.
Internal Revenue Service Tax Debt
According to "Nolo's Encyclopedia of Everyday Law" by Shae Irving, state homestead protection laws preventing the seizure of primary residence to pay a debt do not apply to the federal government. The federal government can also seize retirement accounts that other creditors cannot touch.
Federal Debt Recovery Methods
The federal government can begin collections after sending notifications to the individual's last known address and does not have to show proof of receipt before garnishing wages. The federal government can intercept income tax refunds and apply them to tax debt or outstanding federally backed student loans; no other lenders have this power.
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