Expert: Regan Shinski - 9/2/2010

Question
I have defaulted student loans that have been sold to NCO Financial. I lost my job 4 years ago, and couldn't keep up with the agreed payments. I moved to a different state and regained employment, but by that time NCO began to garnish my wages at my new place of employment. I have been getting my wages garnished for about 3.5 years now, and I'd like to get myself out of garnishment and get the loan back on a regular payment schedule to start to repair my credit. i want to work with NCO, but they are being completely unreasonable. Demanding an additional 400 dollars a month for the next 9 months on top of the wage garnishment. Not only are the rates ridiculous, they wont even send me a letter for the terms of this agreement before I accept! They claim that once I send them my first payment, then I'll get a letter for the agreement. Before I agree to pay these "people" I want a guarantee that after 9 months of unreasonable payments, the loan will be start to be reported in good standing. Any thoughts or ideas would be greatly appreciated.

Answer
Hi James:

You are not going to like my answer.  You are at their mercy.  A judgement is a powerful collection tool and why I always advise to avoid them at any cost.  They are not going to give that up unless you give them something BIG in return.  Even then, I doubt they will give it up without payment in full first.

On the positive side, once the debt is paid they HAVE to report it as paid and satisfied to the credit bureaus.  If they don't, a simple credit bureau dispute should take care of it.

Short of filing a motion to vacate the judgement (retrial) or filing a new lawsuit yourself, you have limited options to resolve this other of paying it off.

You can try disputing the accounts with the credit bureaus now.  This is separate from the payment of the debt but you may get lucky and have the negative accounts come off your credit reports.  This is not likely as - again - a judgement is one of the worst and most difficult to remove from credit reports.  However, if the collection account - not the judgement - is reported incorrectly and they don't fix it, you may have the beginning of a lawsuit against the collection agency.  It's a long process, but that's the first step down that road.

Good luck, I wish I had a magical answer for you, but they really are holding the cards in this case.

Regan