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Dealing with Key Bank after Ch 7- negotiate vs waiting for garnishment

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  • Dealing with Key Bank after Ch 7- negotiate vs waiting for garnishment

    I'll try to make this short. My husband has an over $120,000 private education loan with Key Bank . Our Chapter 7 was discharged in July. He is now getting calls from Key Bank- they just ask him to call. We want to have our ducks in a row before we call. Has anyone had success negotiating a payment plan with them? Previously we were paying over $1000 per month- that would be impossible now because I am out of work and staying home with our children. (Just for our kids to go to daycare would be over $2300 per month) However, they may not see it that way because my husband makes about $93,000 year - we live in a HCOL area.

    Any tips on negotiating with Key Bank to get a reasonable payment? Would like to avoid garnishment- which would be 15% of his salary as I understand it. We currently live in Illinois just moved from Florida.

    Thank you for any constructive advice you can share.

  • #2
    In my experience, as soon as my chap 7 was discharged, Key defaulted my loans even though they were current on payments. The only thing they would negotiate with me was a settlement amount of a lump payment of about 60% of the remaining balance. They did offer to let me make very small payments a month while the loan was in default so they could extend the statute of limitations for suing me but I was told that the amount I paid wouldn't be shown on my credit reports at all, I wouldn't have access to my account balance or interest rate, they wouldn't send me any kind of monthly bill, and that they could make the rate anything they wanted. The question to you is: Have they defaulted your loan yet? You can find this out by checking your credit report - you don't have to call them. Are the calls coming from "Key Bank recovery department"? Those are the people who call when it's defaulted.
    Also, the garnishment % would be from the state where the loans were taken, not where you live now.

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    • #3
      Originally posted by gml120 View Post
      Also, the garnishment % would be from the state where the loans were taken, not where you live now.
      This is not correct. Unless there is a judgment already in place, they have to sue you in the state where you currently live, and are limited to garnishing whatever that state's laws permit.

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      • #4
        I know that people can and do file Ch13 BK after a successful Ch7 in order to manage IRS payments. I do not know if this would be possible with Student Loan debt of any kind. But the idea may be worth pursuing. Schedule two or three consultations with BK attorneys in your area and see what they say.
        "To go bravely forward is to invite a miracle."

        "Worry is the darkroom where negatives are formed."

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        • #5
          Am I reading this right, you were current on your students loan and they still defaulted you.
          We have been paying on our parent plus loan every month. We should be discharged any day now. I'm going to have to check into this. Hope they will talk to me

          Pam

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          • #6
            Originally posted by pamkev View Post
            Am I reading this right, you were current on your students loan and they still defaulted you.
            We have been paying on our parent plus loan every month. We should be discharged any day now. I'm going to have to check into this. Hope they will talk to me

            Pam
            This is very interesting to me. I would also like to know if this is what's going on. On a side note, Pam, I can't wait for your hamster dance!
            Filed Ch 13 Feb 9, 2012, 341 meeting Mar 15, 2012, Confirmed Apr 5, 2012
            Anticipated freedom party Apr 2015

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            • #7
              Yes. Keybank automatically defaulted my loans with them and also my husband's because we filed ch 7 jointly even though we were current on payments. These were private loans. My federal loans were fine, no problems whatsoever, just a delay with them processing the discharge until I could resume payments. Also, my and husband's Citibank private loans were on their way to default but after paying ludicrous late fees and a higher interest rate they agreed not to default them. Basically we came out of a ch 7 with a public record and then $40,000 in defaulted loans. I called my bk attorney and he said that he didn't know that was going to happen. I hired 2 other attorneys to fight this but it didn't work. There is some provision in the promissory note stating that if the borrower or cosigner declared bankruptcy the loan will default and the entire balance will become due. So we've spent the last 3 years saving up money for a settlement with these vultures having credit worse than bankruptcy.

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