Do creditors charge interest on charged-off debt?

[luckstyl]

My situation is relatively complex, so I'll just go over the cliffs notes.


- I owe $54,000 to the department of defense for repayment of an ROTC scholarship after getting injured and kicked out of ROTC
- I have certified paperwork from the Army verifying that the amount due is $54,000
- The debt was 'charged off' in early Fall of 2010
- I have other substantial debts that arose after I lost my scholarship
- I plan on filing Chapter 7 in June once I have paid my lawyer in full
- It's not clear as to whether the 54k is dischargeable in Chapter 7, but it probably is not. All of my other debt is dischargeable, so I will proceed with Chapter 7 regardless.

In February of this year, they began garnishing my wages, but it was by a manageable amount. In reviewing the garnishment paperwork, they listed the amount due as $69,000. I'm trying to figure out where the extra $15,000 came from. It's a period of about 14 months, so that seems to be way, way, way too high to be accrued interest between December of 09 and February of 2011. I also have noticed that once my other debts were charged off by the lenders, the balances did not increase one cent.

I want to move on with my life after the bankruptcy and re-establish my credit, and had resigned myself to the fact that I'd need to pay back the $54,000 to the government. But now they're saying it's $69,000 and that means extra years and years and years of payment, AND the debt is listed negatively on my credit report so I won't even be able to rebuild my credit after the discharge of my other debt.

Does anyone have any ideas at all as to what the heck is going on with the $15,000?

[DYLAN150]

I was once over paid by the VA in the amount of 8K or so and I wrote a hardship letter, they dropped it to 4k. Is this possible with your debt?

[luckstyl]

I'm not familiar with hardship letters so I'm not sure if it is or not. Your debt was classified as a government overpayment? Did you pay it or could you discharge it in bankruptcy?

[Exployer1234]

When I had a judgement go through and I was going to try to work out a payment plan with the lawyers office I was told that they would charge 10% interest on the debt. So it is possible that interest was charged on the debt. 15K seems like a lot though. I would find out what extra charges they have tacked onto the debt. You could be paying for the court cost and lawyer fees as well.

[luckstyl]

the thing is that there were no court costs or lawyer fees. They didn't get a judgement before going after my paycheck. According to the paperwork they sent, the DCIA of 1996 allows the government to garnish wages without first obtaining a judgement against me because the debt is a "delinquent nontax debt to the United States".

[DYLAN150]

I paid it back but you should check the hardship letter (waiver) thing out. What have you got to lose? When they sent me the bill for 8K, it said I could request a waiver. So I wrote a hardship letter and they dropped half of the debt. I think I read somewhere anytime you owe DOD, you can request a waiver of some or the total of the debt. I mean that's a lot of money, any amount waived, would help. Just an idea. Good luck.

[luckstyl]

thanks dylan, i definitely will check it out.

[Exployer1234]

the thing is that there were no court costs or lawyer fees. They didn't get a judgement before going after my paycheck. According to the paperwork they sent, the DCIA of 1996 allows the government to garnish wages without first obtaining a judgement against me because the debt is a "delinquent nontax debt to the United States".

Yes there is no court cost, but haven't you heard the price of everything has gone up 15K? J/k I do feel like everything goes up in price though.
I would try the letter. It does not hurt.

[luckstyl]

Dylan do you know how I would go about doing that? I found a link on the DFAS website but the site won't let me post it because I don't have 15 posts. Anyway, unfortunately, my situation doesn't qualify for what I found

[DYLAN150]

I would write the letter even if they say you can't. You have nothing to lose by doing so. Put some time and thought into it. I have always found the Gov't fairly easy to work with concerning debt. At least get a repayment plan you can live with. If they say no, then ask to have the interest dropped. Don't give up.

[kornellred]

A scholarship is not a debt, You were injured and unable to take advantage of the scholarship. Therefore, ROTC should never have been paid the money. You did not spend the money. I don't get it - I guess it's a good thing that I don't have to get it.

[daylate]

Our great government at work. Unless it was a severe case of negligence on your part (and even then) I fail to see how you not being able to continue to participate in ROTC should require you to have to repay a scholarship given and received in good faith. I can see them not continuing it but to have to repay seems like bs to me. God I get more pissed off about our system everyday. Forgive the rant, I just get crazy over things like this. Maybe if they put an equal effort into getting GE to pay some taxes, we'd all be better off. Good luck.

[luckstyl]

The Army says I should have worked harder to get back into shape following my two surgeries. I probably could have, to be honest, although I was making a lot of progress towards the end. Anyway, I talked to someone at the treasury department, and apparently there is a law on the books that says anytime a debt to the government is delinquent and transferred to the treasury for collection, they automatically add 28% to the total. So my debt went from 54k to 69k. depressing.

[Brasky]

It cannot be the case that if you are injured and cannot continue because of the injury, you must repay the scholarship. That sounds too unreasonable. I feel like there must be more to this story. And if there is not, you need to contact the ROTC about this and determine who you need to talk to see if something can be done.