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I co-signed a student loan for our nephew, who has defaulted. I now need advice as to how to proceed.
Anonymous3 views4 answers
If I am indeed going to be held responsible for this loan now, our circumstances have changed. When I co-signed we were both employed and healthy. I am now permanently disabled with multiple medical problems; and my husband is now retired in order to take care of me. We are now on a fixed income which was not the case at the time I co-signed the loan. Will we be able to negotiate an affordable payment or settlement? By law, If we endeavor to make any kind of payment that we can afford to the company involved, must they accept it? What rights do we have as our situation has changed so much from the time that we signed the loan.
Find a student law attorney on or use the link below. Federal student loans have income-driven repayment plans, although private student loans do not. Your disability may even make you eligible for loan forgiveness for federal loans.
Andrea WhitehillBankruptcy AttorneySan Diego, CA ·
Student loans are not dischargeable in bankruptcy, except in very limited circumstances that you may or may not qualify for.
One question I have is how much debt are you obligated to pay? A Chapter 13 bankruptcy can spread that debt over 60 monthly payments.
The collection agency may agree to accept payments but will continue to charge interest and possibly fees.
You need to consult with a bankruptcy attorney to go over your entire financial picture to discuss your options.
The fact that your circumstances have changed is not a defense to liability for the debt. However, if we are talking about federal student loans, you may qualify for an administrative disability discharge. See this website.
https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation/disability-discharge That is your best option at this point, again, assuming we are talking about federal student loans.
If you co-signed private students loans, the situation is more dire. There, you may consider a bankruptcy and seek an undue hardship discharge (but bear in mind what that involves, the filing of the bankruptcy is only the first step, to discharge student loans in BK, you need to sue, in bankruptcy court, and "prove" that repaying the student loans creates an undue hardship). The other avenue is a bit much to explain here, but since you did not co-sign for a spouse or dependant, you may have an argument that the loan is NOT a qualified education loan, and therefore would be treated like a regular unsecured debt in bankruptcy. But that idea only has meaning inside a bankruptcy. Outside of bankruptcy, you are at the whim of the student loan servicer.
As for this statement: "By law, If we endeavor to make any kind of payment that we can afford to the company involved, must they accept it?" They WILL accept it, they will accept whatever money you send, but that doesn't mean you won't be in default. This is a very odd myth that keeps coming up. The idea that a debtor can send any payment amount they want, and the creditor can't do anything to them. I am not even sure where this myth comes from, because it is not like it was ever true at some point and now isn't.
Please seek the advice of a local student loan lawyer. Do not sent any payment in at this time as there is an applicable statute of limitations on private student loans. Under certain circumstances, student loans can be discharged.
