Q. My 56-year-old son went to a private truck driving school many years ago and is still paying for the loan. He had originally a loan of $6,500. Since then he has been garnished and every year his tax returns have been taken to pay back the loan. Needless to say, he has paid it back several times over, but because of interest, he may never finish. Also he doesn’t know who has the loan. How can we resolve this?
— Trying to help
A. Your son is going to have to be proactive to straighten this mess out.
First, he will need to first establish who you owe the money to.
Start with the driving school to see if they hold the loan, said Jody D’Agostini, a certified financial planner with Equitable Advisors/The Falcon Financial Group in Morristown.
He can also see if he can learn anything from taxing authorities who have garnished his tax returns, as well as tracking down any judgments against him, which would identify the owner of the loan. Checking his credit report is another possibility.
Once you figure out who holds the loan, you can try to negotiate with them by offering to make voluntary monthly payments, D’Agostini said.
“Sometimes it helps if you allow the debt to be automatically deducted from your checking account until you satisfy the debt,” she said. “I would ask to negotiate the terms to reduce the interest rate and structure the loan to a payment you can afford over a fixed period. This will allow you to finally have it paid off.”
D’Agostini noted that New Jersey has laws that limit the amount that can be garnished from your earnings.
“The amount varies but is generally between 10% and 25% of your disposable income,” she said. “If there is a reduction in pay, then perhaps you can also negotiate the terms based on your new circumstance.”
There is another way to immediately stop the garnishment, she said. Depending on his circumstances, he could declare Chapter 13 or 7 bankruptcy and may be able to have the loan discharged, she said.
Email your questions to Ask@NJMoneyHelp.com.
Karin Price Mueller writes the Bamboozled column for NJ Advance Media and is the founder of NJMoneyHelp.com. Follow NJMoneyHelp on Twitter @NJMoneyHelp. Find NJMoneyHelp on Facebook. Sign up for NJMoneyHelp.com’s weekly e-newsletter.
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