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What should I do about private student loan?

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  • What should I do about private student loan?

    I filed for Chapter 7 and my 341 meeting is in a few weeks. I'm still stressed out but finally starting to feel like the end of this nightmare is near. I understand that my student loans are not dischargable and I've negotiated an IBR plan with my federal loans. However, I have some private student loans through Wells Fargo that are a big part of the reason I ended up in this mess, and it is those private loans I am worried about, since I understand after my Chpt 7 is closed, WF is able to come after me again for those.

    Background: After my divorce, I ended up with pretty much all the marital debt because frankly, I was an idiot and allowed my ex to bully me into using his lawyer for an uncontested divorce. I quickly got behind in bills and never recovered. Wells Fargo called and said my loans were in default and I was completely confused/flustered, and I ended up agreeing to a payment plan for all 4 of my private loans at $1200/month for 18 months. It was my understanding that this would take care of the entire debt. At 18months, I get a letter stating my loan was paid off, but they continued to keep taking the $1200 out of my account. This killed me financially. When I called to complain, they told me that only ONE loan was paid off, nothing was paid on the other three loans, and I had to keep paying for the other THREE loans the same way. I told them that wasn't what I agreed to at all, and I never would have agreed to $1200/month for SIX years. They refused to negotiate anything. I had no money for food or rent, so I had to close the bank account. That last payment was in April 2014, and that one private loan is listed on my credit report as collections/paid with a zero balance.

    The other loans are listed on my account with balances/in collections, and the last payments to them were in November 2012. I believe the original loan contract called for laws of the state of PA to apply (I went to school in PA), and if that is the case, then the SOL is 4 years and they can no longer collect. If the SOL from my state of residence applies, then it is 6 years, which will end in 11/2018. I'm trying to find the original loan paperwork to clarify that. The loans are all scheduled to come off my credit report in 11/2019 (per my records and TU).

    My question is: Should I just leave this alone, or should I try to do something about it? I don't want to mess up my fresh start, but they're going to keep reporting those loans as CO every month. If they try to apply my home state SOL, I don't know if I should just sit tight and wait to see if they try to sue me before 11/2018, or if I should try to file for a hardship discharge instead. Even after that date passes, my credit report will still get dinged until it comes off in 11/2019. How likely is it that they will come after me to sue? (I'm self-employed, already defaulted on the collection agreement, just filed bankruptcy.) Should I try to make an offer to settle just to get it off my CR? If I do nothing, and they do nothing, how bad will it hurt me as far as trying to rebuild my credit? I am also aware that Wells Fargo has been in a load of trouble recently regarding their student loan practices, and I think I have a pretty strong case that I was one of the damaged parties, so at least I have that if they do try to sue me. I was definitely led to believe that my loans were all being paid each month by my payment, when in fact, it was only going to one loan at a time, and the remaining loans were still being reported as delinquent. https://www.consumerfinance.gov/abou...ing-practices/

    I don't want to make any of it worse, but if there is a way to help the situation and possibly keep the damage to my CR as little as possible, I am open to suggestions.

  • #2
    This sounds like it is worth filing an adversary proceeding to determine the dischargability of the private student loans. As the process seems to be the same, why not go for your federal loans as well? It seems if you could have been paying for the federal loans vs the private loans, you might have made serious student loan progress. Check with real attorneys to see what they say.

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    • #3
      Originally posted by Maria80386 View Post
      This sounds like it is worth filing an adversary proceeding to determine the dischargability of the private student loans. As the process seems to be the same, why not go for your federal loans as well? It seems if you could have been paying for the federal loans vs the private loans, you might have made serious student loan progress. Check with real attorneys to see what they say.
      Thank you Maria. I will bring it up with my attorney, but I know filing an AP is going to be a lot of extra charges. We did briefly discuss my student loans at my first consult and he didn't seem too hopeful of getting a hardship discharge; he seemed to indicate I'd have to be disabled to get one. I have been reading a lot about it, though, so I do wonder if maybe I should consult another attorney for another opinion. My federal student loans were in hardship deferment, and when I decided to file bankruptcy this summer, I was suddenly able to work out an income based repayment plan which is $0/month for 25 years and the remainder of my loans are forgiven after that time. They pull my tax return info each year and base it off my AGI, which since it is so low, it qualifies me for $0 payment. The good thing about that is that is shows on my credit report as current on all those federal payments and they're all in good standing.

      The private loan thing was a cluster; I thought the private loans were included in the deferment of all my other loans, so I panicked when WF called me threatening to sue me and said there was no other option but to pay them in full. I was already divorced and struggling to make ends meet at that time and should not have agreed to the $1200/month, but I resigned myself to eating ramen noodles for 18 months thinking it would be completely paid off, and then i could start dealing with my federal loans. My income has taken a huge hit since then & making those payments to WF killed all the savings I had.

      I think I should get a second opinion from another lawyer, but do I have to wait until my bankruptcy is closed? I don't want to make trouble with my current lawyer. He's great, very experienced, but is very short and abrupt and seems impatient with questions. I'm sure he's used to dealing with people who have no clue as to what is going on, so I can't fault him for that. Last time I had called with concerns he told me reading bankruptcy stuff on the internet is like looking at webmd, and I need to stop reading and just ask him if I have questions. (I did call him with my question, but he asked me why I was worried about it and then seemed upset when I told him I looked at stuff online.) I guess I'm just a little frustrated and am looking for more than "sign here, sign here, initial here, see you in court". I'm a researcher by nature, I just have an obsessive habit of learning everything I can about anything I'm involved in. I want to know I am making the right decision, but I also don't want to wake a sleeping dog if I don't have to.

      Lol, I think I'll be much more sane after this 341 hearing.

      Comment


      • #4
        First, consult with an attorney to make sure that the statute of limitations on the student loans has passed. Your bankruptcy attorney may be able to answer that question. This is a reasonable question to ask. If the attorney is short and seems annoyed, so be it. Try to brush that off. If his practice does not include debtor/creditor litigation, he may not know the answer to the question. There is no reason why you can't talk to another attorney. Your bankruptcy attorney may be able to refer you to one.

        If the statute of limitations has passed, I would not pay anything further on the loans. Paying now will not remove the negative reporting any earlier. Also, they are going to drop of your credit report long before your bankruptcy. With the bankruptcy, the loans remaining for another year a two is not going to make a big difference to your ability to get credit.

        You should keep in mind that even if the statute of limitations has passed, the creditor might still try to sue you, in which case you would have to respond to the suit with a defense that their cause of action is time barred. The risk of having to deal with that nuisance might be worth some amount of settlement to you. If so, make sure you get an agreement in writing before making a payment that the payment is in full settlement of all debt owed to Wells Fargo and that they will not ever try to collect the remaining balance or sell the debt to a third-party.
        LadyInTheRed is in the black!
        Filed Chap 13 April 2010. Discharged May 2015.
        $143,000 in debt discharged for $36,500, including attorneys fees. Money well spent!

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