Government Debts Don’t Disappear
Not a popular subject but the possibility or potential of being involved with a government debt exists for almost every one of us. To think it’s not, is a tough way to learn this, just as you are about to purchase your dream home. Whatever the cause or reason you believe those old government debts went away, they didn’t.
What are government debts?
Directly or indirectly, the most common government debts we see are tax liens, government backed mortgage loans and student loans. Tax liens come in a handful of different forms. Most common are income tax-based liens whether Federal or State based liens. If you owe the IRS money they will send you notices for a short period of time, then place liens in the county and state in which they believe you may own real estate. They may also attach to this, any moneys you have in banks or other institutions. The strategies behind these liens is that when you go to sell your property you have to pay the liens off in full in order to convey a clear title to your buyer.
The biggest misnomer of these types of liens are the thoughts/daydreams of, “we can just move to a different state and no one will now”. Even state tax liens and judgements can be found via today’s technology. Most common response is “oh I didn’t think that was or they were still there.”
Other types of tax liens can be from a small business you owned or had some type of partnership or owner interest in. Most business tax liens can attach directly to the business owner(s) bypassing the corporation’s protective veil. Business owners often think if they just start a new business the old liens will not follow them.
For the home owners that have previously lost a home to foreclosure or bankruptcy will often find that the home was sold through the courts at a much lower value then the amount of their past mortgage balance. Even completing a short sale of an old property can leave you with a deficiency if a complete waive is not agreed to with the lender and secondary investor. One hidden party most often overlooked in a short sale waiver is the mortgage insurance company. They may not have been part of the waiver or release, leaving you with them coming back at you, a year or two later. Remember if you had an FHA loan or a VA loan, these have their own hidden issues and they can rear their ugliness later on down the road as well.
Do you know that most student loans are government debts?
Those that are government loans cannot be wiped out by filing bankruptcy. I have seen credit reports where the student loans are included in the bankruptcy. However, this may reflect that way on your credit report or even be removed from your credit report, but it will still show up within the government data base or systems. These debts are still owed and cannot be extinguished by a bankruptcy.
The amount of student loans that have been taken out over the last 15 years will have a major impact. Many people have taken out student loans without even attending classes. These loans were taken and used as ordinary income during hard years between 2008 through 2016. Many of these loans involve parents who have co-signed on them.
People are also constantly pushing out or deferring the repayment of these loans creating a great debt load by accumulating interest and fees. When push comes to shove and the monthly debts start to dig in hard on the monthly income. These loans are the first to get left behind because they are not attached to anything, unlike an installment is perhaps attached to a car or boat.
The belief is that there is nothing to lose by not paying the student loan debts. This could prove to be very costly in the future and may even have great negative affect at retirement time. The last thing one needs to do is work their whole life only to retire in poverty.
If you have questions on the impacts of government debts with getting a mortgage loan for your home purchase ask us. Get your facts, let’s make a plan and we will see you at a happy closing table.