Ask Liz Weston

Q: We have a huge problem that we’ve been trying to solve without success. We co-signed a $40,000 student loan for our eldest child and then had a serious run of bad luck. My husband was critically injured and out of work for a long period, we lost money in the stock market, and our son has had trouble finding a good job after graduation. A lawyer told us bankruptcy would help our situation, but it didn’t — the lender sued us and now we owe an additional $30,000 because of interest and fees. We hired a second lawyer, but he only made things worse. We make less than $50,000, don’t own a house and have old cars that aren’t worth very much. Our only asset is a retirement account worth $30,000. We have begged the collection agency for a repayment plan that we can afford, but our pleas have been ignored. We have two more kids to help with college and feel as if we are living in a nightmare. Do you have any hope for us?

Answer: You’ve discovered the modern reality of student loans: Once you’ve got them, you’re stuck with them.

A federal law change in 1998 made most student loans virtually impossible to erase in Bankruptcy Court. (The recent bankruptcy reform act tightened the law even further to include loans for education made by for-profit lenders.) Unlike most other secured debt, there’s also no statute of limitations on student loans. That means a lender can sue you decades after the loans were made. The statute of limitations on other debt is typically a few years.

All this means student loan collectors can really play hardball with debtors. You can’t run, you can’t hide, and the collection agencies monitor your credit reports so they can jump in if your financial situation seems to be improving.

You may be understandably soured on attorneys. But if your requests for an affordable repayment plan are being ignored, your best bet might be to hire another lawyer — one experienced with student loan debt — to deal with the collection agency. The National Assn. of Consumer Advocates at (202) 452-1989 or http://www.naca.net can provide referrals.

You probably need to give up on the idea of helping your other kids with college. Your priorities need to be paying off this debt and saving for your own retirement. You also need to get your oldest son to contribute his part — he’s the one who benefited from all this debt, after all.

ear Liz: I wanted to pass on a suggestion for other readers who might be in the same situation I was: working for a small business that refused to make payroll tax contributions to the Internal Revenue Service, Social Security or the state.

A business’ failure to pay affects employees’ future Social Security benefits, as well as causes problems for them at income tax time.

I reported the fraud by filling out Form SS-8 for the IRS and by contacting our state unemployment office.

Crooked business owners who don’t pay payroll taxes on their employees are short-changing the whole of society.

A: Business owners who pocket their employees’ income tax, Social Security, Medicare and other withholdings are crooks indeed. But so too are the deluded few who insist that they’re not required to withhold anything from employee paychecks.

The arguments of these tax protesters have been thoroughly refuted in the courts, but until the IRS and state tax agencies catch up with them, their employees pay the price.

If you have any question about whether your employer is properly making payroll tax contributions, check the wage and benefit statement you should be getting annually from the Social Security Administration. If the amount for any year is lower than it should be or — worse yet — zero, contact the administration immediately.

You might also want to check your pay stubs carefully against your year-end W-2 forms. If your employer didn’t issue W-2s, contact the IRS.

Dear Liz: Your column on tracking receipts was quite interesting, but it still appeared to be a lot of work.

The method that I use is to enter data from my credit card statements when they arrive, and enter information from cash receipts two or three times a week, into my Quicken personal finance software.

At tax time it is easy to create reports for my accountant. (The information can also be exported directly into TurboTax, for those masochists who want to do their own returns.)

A: Personal finance software like Quicken or Microsoft Money is indeed a huge time saver and a great way to track your finances. But most people haven’t gone to the trouble of buying and using such software, which is why it’s important to discuss other paper-handling methods.

By the way, you probably could save even more time by setting your software to download your transactions directly from your credit card companies. You could update your records as often as daily, rather than having to wait until the end of the month, and you wouldn’t have to do all that tedious typing.