My return was offset by a collections company for a military Star card from 15 years ago. Is there a statute of limitations of 10 years on that?

[eviebrk]

Is this considered a federal debt like AAFES (Military Star card) told me?

Is there's a statute of limitations on garnishment of federal debts. It is my understanding there's a 10 year statute of limitations on collections for federal debts.

If it is not considered a federal debt, then how are they able to garnish it?

Last week my tax return was offset. I contacted Transworld who is a collections company who garnished the return. They represent AAFES who I had a military Star card with about 15 years ago. When I cleared out of the army, and AAFES, they didn't inform me of any debts. I thought it was paid off but apparently I owed about $3,000. Since then it has accrued $7,000 in interest. It's never showed on my credit and I've never received a notice about it. I've even received returns in the past but this year it was offset and went to trans world. Transworld and AAFES claim that it can be offset because since it is AAFES it is considered a federal debt. It is my understanding that a federal debt has a statute of limitations of 10 years. So first, I'm confused how they can offset this after 10 years. AFFES told me they did not actually sell the debt to the third party. Transworld is just collecting for them. But the debt is still with AAFES and is over 10 years old. Maybe the 10-year statute of limitations started whenever Transworld took over collections for the debt in 2014. I am not sure. Any advice would be greatly appreciated.

I have no problem paying back the money I owed which I already have and then some. My tax return was 3800. I originally owed about 3,000. This is from a Military Star card that I originally got in 2003 and didn't use after 2005. I made payments on the car during my last appointment in 2010 and thought it was paid off. Regardless, the first notification I have received about this debt was this offset in 2021.

If there's nothing I can do about this it seems as though I will be giving up my next 5 to 10 years in tax returns to this company.  Even though they took this tax return it will accrue another$1,500 per year in interest. So I feel like it will be never ending.

Well, hopefully someone's got some good answers. Thanks.

[Bsch4477]

Your question is more of a legal one than it is tax related. You might want to get legal advice. 

[Opus 17]

Your question is confusing because, if we are talking about your federal tax refund, only the Bureau of Fiscal Services can collect a debt or process an offset.  It might have been requested by another collections agency, I suppose.  But if you haven't talked to the BFS, I would call them first.

https://www.irs.gov/taxtopics/tc203

The BFS can collect any federal debt, including tax debts and debts relating to other federal contracts, as well as child support and unemployment compensation (if you owe repayment).  AAFES does appear to be a federal debt that would be eligible for offset.

The Exchange Credit Program (ECP) is administered by the Army and Air Force Exchange Service, a nonappropriated fund entity of the Department of Defense. Established by Congress in 1979 to protect service members from predatory lending, the program offers responsible credit solutions to Warfighters and their families.

You may want to do some research into the Military Lending Act.

https://files.consumerfinance.gov/f/documents/cfpb_military-lending-act-know-your-rights_handout.pdf

https://www.fdic.gov/resources/supervision-and-examinations/consumer-compliance-examination-manual/d...

There does not appear to be a statute of limitations on debt collections built in to the MLA; if there is one that applies to you, it would be in the state where you were a resident when you had this debt.

https://www.consumerfinance.gov/ask-cfpb/what-is-a-statute-of-limitations-on-a-debt-en-1389/

You would probably have to start by contacting the consumer finance protection agency in the state where you live, and/or the state where you lived when you had the credit card.   

[Lokita]

I’m not confused

They are going to take my return this year and my pay has been offset as well. I hope you get it all settled because sheesh that is a lot to handle . 

[Danielc23]

I’m wondering the same. I just received a letter stating I owed money, but I remember paying off my statement a few years ago. 

[Danielc23]

Are the garnishing your retirement pay, VA pay, or your work pay? 

[Danielc23]

@Lokita  please see above comments 

[eviebrk]

This was a while ago when I posted this, but I can tell you how mine turned out. There is a limitation, but AAFES will fight you all the way on it. You can hire an attorney (which will cost more than you'll lose in a settlement most likely), or settle with AAFES. That was my experience anyways. I'd have to look back through my documents. But I want to say my AAFES debt was pretty high. The interest kept accruing. Over 10k for an original amount of like $3500. AAFES let me clear post so I thought it was paid off. That or I was young and dumb. Anyways, I called and denied I owed it. Told them I would be willing to settle for less than what I originally owed. They took around $1200. Not bad considering. So I suggest calling  AAFES (Military Star) and disputing it. They have a department specifically for this. It's been a while so I apologize I can't remember the name. But they know there's a statute of limitations. So they'll go low as long as you act like you know what you're talking about. They also know you don't want your taxes tied up in court, so expect to pay something.  Hope that helps.

[eviebrk]

I forgot to mention. If you call Military Star and settle, they will make sure what is left over gets back to you pretty quick. Say your tax return is $3k and you settle with AAFES for $1000. They'll keep their $1k and deposit the remaining $2k into your account. It doesn't have to go back through the IRS.

[sd_trigg]

Hi,

I have the same issue right now. I opened up Military Star card back in 2014 for $4200 and it’s now closed. The highest balance was almost 8-9K. They have garnered my tax refund the last two years. What do you suggest in terms of calling them to settle? Will they do pay for deletion for your credit report? 

[Danielc23]

I ended up calling them and signing a repayment thing. I can tell that the only reason I did is because I don’t know if they would garnish my VA pay and don’t want to risk it. You could try and settle

[sd_trigg]

Did they agree to delete it from your credit report when it’s paid?

[sd_trigg]

The offset showed up in 2021 for me as well. They began taking my tax refund. The last one they took left me with 50 dollars to my account. I’m thinking about calling them to dispute but I’m not sure about them settling for less than the amount originally owed. Mine racked up to almost 9 grand due to interests as well 

Did they agree for deletion of your report when you paid? 

[Cheirairem]

Hello, 

who did you contact to settle? I owe $2800 and tried settling for 1,000 this morning but Trans World told me they would only take $2300 the man was so dismissing, if you could please give me any info I would appreciate it.

[sd_trigg]

Hi!

Yes whatever you do, don't communicate with TSI (Transworld).  We probably spoke to the same man named Brandon. He was very dismissive. When I called, we agreed on a payment plan for the full amount because they refused to accept the amount I was willing to pay. When time came for payment, it never went through or got processed. So I called back, same guy answered and he acted like we hadn't spoke. From what I read, assuming I claimed it was my debt, the statute of limitations for my debt was reset.  

I emailed two addresses:

[email address removed] 

[email address removed]

In that email, I stated I wanted to reconcile a debt, the amount it says I owe and how much was already offset in tax returns. State what you're willing to pay X to settle your debt and that you tried to talk to TSI but to no avail that they wouldn't honor it and will not communicate with them further. In doing so, I got replies a couple days after from their office agreeing they'd accept that amount by X date and who to contact. MAKE SURE TO ASK FOR A PAID IN FULL LETTER for your record as well as it be removed from collections after paid. It happened for me! I got a PIF letter some time later and it reflects my credit report as paid in full. 

I went to a local Navy Exchange and because I didn't have my physical Military Star Card, they gave me a phone number for collections which is [phone number removed]. That is the number for AAFES. I made the payment with them for the amount I could afford. It was confusing since ironically after I made contact with AAFES, Transworld sent a letter in the mail asking for the amount I wanted to settle for. Very strange. Now I'm not entirely sure if AAFES communicates with Transworld but I suggest never contacting Transworld directly. I disregarded that letter because I had already made a payment with AAFES by that time.

Good luck. Let me know if I can clear up any confusion or if you have any more questions.