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  1. #1
    Join Date
    Oct 2014
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    2

    Default Federal Student Loan Default and Inheritance

    My question involves collection proceedings in the State of: Michigan

    I am currently in default for roughly $19,000 of federally subsidized student loans. I just received a $10,000 distribution from my deceased grandmother's trust. Since deposits of $10,000 or more are reported to the IRS, is it safe to deposit this into my account? Could the government freeze my account?

  2. #2
    Join Date
    Sep 2005
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    98,846

    Default Re: Federal Student Loan Default and Inheritance

    Nobody here can promise you that a creditor is not going to attach your funds.

  3. #3
    Join Date
    Oct 2014
    Posts
    8,238

    Default Re: Federal Student Loan Default and Inheritance

    Deposits of $10,000 or more by you into your own bank account are not reported to the U.S. Treasury/IRS on a currency transaction report (CTR), Form 8300. The deposit itself is a record of the transaction, which provides a way for the Treasury to trace the funds in the event it suspects money laundering or other illegal transactions and provides a way for the IRS to trace funds to determine unreported income. If the account pays interest, however, the bank must report the interest paid to the IRS on Form 1099-INT.

    There are various ways that the Education Department might learn of the account and attach it to pay the student loan debt. There is no way anyone here can assure you that the funds won’t be taken. Given that student loans cannot be discharged in bankruptcy unless you can prove an extreme hardship, this debt will sit around and continue to grow as interest and fees get added to it. You’ll continue to be pursued to pay it. That being the case, you might consider that the $10,000 might in fact be well spent in paying down the student loans unless you have some real urgent immediate need to pay with those funds (in which case the money probably won’t be in the account long enough to have to worry about it being attached anyway).

  4. #4
    Join Date
    Oct 2014
    Posts
    2

    Default Re: Federal Student Loan Default and Inheritance

    Thanks for your replies. I have a follow-up question:

    It's my understanding that a bank account has to have a minimum balance in order to be attached by a creditor. When a creditor tries to attach an account, and that account does not have sufficient funds to be attached, does the creditor have to actively try again later, or could an attachment be triggered to go into effect automatically should that account increase past the minimum?

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