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Student Loan Debt and Central District of California Chapter 7 Bankruptcy of Co-Signer
Anonymous3 views3 answers
5 years back I co-signed on my sister's private student loans. Once my sister left school because the school closed down the campus she was attending, she made arrangements with the lender to automatically withdraw her monthly payments from her checking acct. My sister was current with all her payments up until I filed bankruptcy, chapter 7. The lender immediately stopped withdrawing money from her account, placed the account in default, and demanded the debt in full. We have since learned that there is a clause in the contract that if either of us began bankruptcy proceedings that this would be in the end result. Is there anything my sister can do to get her loan out of default without having to make payment arrangements with the collection agency or pay the loan in full?
You can seek to have them take the debt out of default, but there is no guarantee this will work.
This is terrible and I have had a client where this happened to them and it was difficult and time consuming.
Good luck.
Talk to your attorney about switching to a 13 - you should be allowed to cure the default via the plan. Only your bankruptcy attorney will know local procedure regarding this. It does not work in all areas of the country, but I have heard that the Courts and Trustees are coming around to this idea. A private student loan is a long term debt and should be treated as such. Also, talk to a local attorney about debt defense - perhaps being in default won't really hurt you, if there is nothing to attach and if the lender is slow to enforce - gives you time to save up for settlement. Again, speak with a local consumer attorney who can tell you how things work in your area.
