How to Remove Yourself From Federal Debt

Federal debt is the most serious type of debt. The most common federal debts are outstanding IRS taxes and student loans. Only in the most desperate of financial conditions is federal debt cancelled or forgiven--and in some cases, these situations still do not erase these debts. The only way to remove yourself from federal debt is to repay the obligations.

Instructions

1

Pull a current copy of your credit report from a free online provider such as AnnualCreditReport.com. Review all trade lines on the credit report, paying specific attention to student loans. Then look at the judgments and collections section. This will show any outstanding tax liens. Add up all of these debts to get a total amount outstanding.

2

Determine whether you are up to date on all federal loans. An IRS tax lien on your credit report means that you are seriously delinquent. Any liens must be given priority attention. The IRS, unlike credit card companies, can easily garnish your wages and freeze your bank accounts. Bring accounts up to date if possible.

3

Contact your federal lenders if you are struggling to make your minimum payments and are in danger of default. Speak with an account servicing representative. Ask about hardship or consolidation plans. The IRS will look more favorably on your situation if you are taking preemptive steps to eliminate and reduce debts.

4

Refinance your federal debts with a private lender if you cannot acquire a hardship plan or consolidation through your federal lender. Refinancing means losing the usually low rates of government loans. However, in dire circumstances, this will eliminate the federal debt and stop the IRS from seizing assets.

5

Review your budget once you've stabilized your federal loan payments. Track all of your expenses for one month and look for areas to cut back. Take a hard look at non-essential expenses such as entertainment and dining out. Make a new budget that applies all disposable income toward federal debts. This will speed up the payoffs.

6

Think creatively about paying off federal debts. Consider using a retirement fund loan, any savings you have accumulated or other investments. Be sure to speak with a trusted advisor--like an attorney or accountant--before making large financial decisions about retirement funds.