I've never heard of a loan of this sort not being dischargeable in a Chapter 7 bankruptcy. It sounds to me that the Feds sold this debt to a collection agency they are using whatever means to scare you into paying them. I've heard of threats from credit card companies telling people they're going to put him in jail if they don't pay their bill and we all know that's not true. You might want to consult with a local bankruptcy attorney in your state and confirm this.

