85 year old Grandmother received judgement for Grandson's student loans

[mejallen]

UPDATE 03/09/24

Thank you so much for all the time and advice. We have a response from legal aid and a process for relief.

All of you provide a great service and support.

Texas

Sorry for so many details.

20+ years ago, my mother co-signed my nephew's student loan for a small college. He went for two years as a pilot to learn more. The total of loans (5 noted on current paperwork even though she only comes co-signed one contract) was around $60K.

After the two years, my nephew joined the Air Force. My sister divorced his father so my nephew hasn't spoken to this side of the family for 17 years.

My mother received a notice from the state that he was on default. His Facebook showed him traveling the globe with a beer in every pic and he kept deferring the loan and wasn't paying on the debt. His father handled all his banking so it was a mess. I found his Commanding Officer and called him and explained the situation and that he could negotiate the debt and his grandmother cannot afford to pay it for him. The C O sent me an email a few days later stating my nephew understood his obligations and would begin payments. Because his father was still handling his banking several more were missed and the father begged me not to contact the C O again and he started paying.

Currently -
My mom/his grandmother is 85 and gets $1,200 monthly on SS. She and I bought her a condo together and it is paid for other than an equity loan and homestead in her name.

My nephew is 36 and a flight instructor at a state college with a wife who is a veterinarian. Still hasn't spoken to any of us.

Two weeks ago, my mother was served from the state and they are placing a judgement on her for $120K and want her to pay $1,700 monthly. She was told they placed a judgement on him also.

What do we do?
We can't afford an attorney and travel back and forth four hours one way to court.
Do any payments she could pay lower his responsibility?
His deferral decisions were never discussed with her even though she is responsible.
She was ready to sell her house, pay off the equity and we would split the profit for her to live on (reside with me or my sister) and my share would go into a retirement account. Now, we can't.
Can she transfer her half of the property to me?

We don't know what to do and the state legal aid office listed on the paperwork hasn't returned any calls.

Your assistance and advice would be greatly appreciated.

 

[quincy]

Texas

Sorry for so many details.

20+ years ago, my mother co-signed my nephew's student loan for a small college. He went for two years as a pilot to learn more. The total of loans (5 noted on current paperwork even though she only comes co-signed one contract) was around $60K.

After the two years, my nephew joined the Air Force. My sister divorced his father so my nephew hasn't spoken to this side of the family for 17 years.

My mother received a notice from the state that he was on default. His Facebook showed him traveling the globe with a beer in every pic and he kept deferring the loan and wasn't paying on the debt. His father handled all his banking so it was a mess. I found his Commanding Officer and called him and explained the situation and that he could negotiate the debt and his grandmother cannot afford to pay it for him. The C O sent me an email a few days later stating my nephew understood his obligations and would begin payments. Because his father was still handling his banking several more were missed and the father begged me not to contact the C O again and he started paying.

Currently -
My mom/his grandmother is 85 and gets $1,200 monthly on SS. She and I bought her a condo together and it is paid for other than an equity loan and homestead in her name.

My nephew is 36 and a flight instructor at a state college with a wife who is a veterinarian. Still hasn't spoken to any of us.

Two weeks ago, my mother was served from the state and they are placing a judgement on her for $120K and want her to pay $1,700 monthly. She was told they placed a judgement on him also.

What do we do?
We can't afford an attorney and travel back and forth four hours one way to court.
Do any payments she could pay lower his responsibility?
His deferral decisions were never discussed with her even though she is responsible.
She was ready to sell her house, pay off the equity and we would split the profit for her to live on (reside with me or my sister) and my share would go into a retirement account. Now, we can't.
Can she transfer her half of the property to me?

We don't know what to do and the state legal aid office listed on the paperwork hasn't returned any calls.

Your assistance and advice would be greatly appreciated.

Two potential defenses for your mother are, one, statute of limitations and, two, being judgment proof. I recommend your mom find a legal aid clinic near her for help and direction.

 

[Zigner]

Being judgment-proof is not a defense.

 

[quincy]

Being judgment-proof is not a defense.

True. I misspoke. Being judgment proof means there will be an inability of a judgment-creditor to collect on the judgment because assets are exempt from collection attempts.

https://texaslawhelp.org/article/what-judgment-proof-means

Being judgment proof can work to prevent a lawsuit if the judgment-creditor learns in advance that any collection action will fail.

 

[Taxing Matters]

If it is a federal government student loan, there is no statute of limitations on collecting it. As you referenced the state suing for a judgment on the debt it's very likely not a federal government loan. You didn't say in what state the nephew is located or where the grandmother lives and that matters because the statute of limitations (SOL) varies from state to state. It may also be that the student loan lender specified a particular state in which disputes are to be litigated, and that may affect the SOL that applies, too. In Texas the SOL is six years. When it comes to loans, the basic rule used in most states is that that the SOL period starts to run the day a payment is missed. The loan then is in default. The problem is that if a payment is made again later, that may reset the SOL starting point to be the date that payment was made. So while the SOL is a defense if the SOL has indeed run out, your grandmother may need to see a civil litigation attorney to sort out what the SOL is and whether that time has run out.

What she doesn't want to do is fail to respond to the lawsuit. If she doesn't answer the complaint the lender will likely get a default judgment and from there may starting enforced collection (e.g. taking her bank account or other financial assets that are not protected from garnishment/levy, taking any nonexept assets she has, etc). It may well be that she has nothing that a creditor could take to satisfy the loan. That would make her "judgement proof". The lien the creditor files in the county or state records office would be a public record that anyone could see and credit reporting agencies scoop up all that information and put it on her credit report.

I suggest she at least have an initial consultation with a lawyer in her state to review her options. We don't have all the necessary information here to do that, and even if we did, no one here may give her legal advice anyway unless the person is a lawyer licensed to practice in her state.

If she does end up paying some part of the debt, she may be able to sue the nephew to recover it, though if he's judgment proof she'd have to wait until he eventually gets something she can take to collect on it.

 

[quincy]

There was some additional information provided in mejallen’s other (now locked) thread on mejallen and his grandmother’s shared property:

https://forum.freeadvice.com/threads/85-year-old-grandmother-received-a-judgement-and-i-share-her-property.663954/

 

[mejallen]

If it is a federal government student loan, there is no statute of limitations on collecting it. As you referenced the state suing for a judgment on the debt it's very likely not a federal government loan. You didn't say in what state the nephew is located or where the grandmother lives and that matters because the statute of limitations (SOL) varies from state to state. It may also be that the student loan lender specified a particular state in which disputes are to be litigated, and that may affect the SOL that applies, too. In Texas the SOL is six years. When it comes to loans, the basic rule used in most states is that that the SOL period starts to run the day a payment is missed. The loan then is in default. The problem is that if a payment is made again later, that may reset the SOL starting point to be the date that payment was made. So while the SOL is a defense if the SOL has indeed run out, your grandmother may need to see a civil litigation attorney to sort out what the SOL is and whether that time has run out.

What she doesn't want to do is fail to respond to the lawsuit. If she doesn't answer the complaint the lender will likely get a default judgment and from there may starting enforced collection (e.g. taking her bank account or other financial assets that are not protected from garnishment/levy, taking any nonexept assets she has, etc). It may well be that she has nothing that a creditor could take to satisfy the loan. That would make her "judgement proof". The lien the creditor files in the county or state records office would be a public record that anyone could see and credit reporting agencies scoop up all that information and put it on her credit report.

I suggest she at least have an initial consultation with a lawyer in her state to review her options. We don't have all the necessary information here to do that, and even if we did, no one here may give her legal advice anyway unless the person is a lawyer licensed to practice in her state.

If she does end up paying some part of the debt, she may be able to sue the nephew to recover it, though if he's judgment proof she'd have to wait until he eventually gets something she can take to collect on it.

Thanks, we are in Texas and don't know when he has made any payments. I am on the real estate paperwork but she is the resident and has the homestead. Not sure how I am affected. This is her only asset and she is on SS. she is judgement proof, they can still take her home when she passes but what happens to my share of the home?

 

[mejallen]

True. I misspoke. Being judgment proof means there will be an inability of a judgment-creditor to collect on the judgment because assets are exempt from collection attempts.

https://texaslawhelp.org/article/what-judgment-proof-means

Being judgment proof can work to prevent a lawsuit if the judgment-creditor learns in advance that any collection action will fail.

Thanks, we are in Texas and don't know when he has made any payments. I am on the real estate paperwork but she is the resident and has the homestead. Not sure how I am affected. This is her only asset and she is on SS. If she is judgement proof, they can still take her home when she passes but what happens to my share of the home?

 

[mejallen]

True. I misspoke. Being judgment proof means there will be an inability of a judgment-creditor to collect on the judgment because assets are exempt from collection attempts.

https://texaslawhelp.org/article/what-judgment-proof-means

Being judgment proof can work to prevent a lawsuit if the judgment-creditor learns in advance that any collection action will fail.

She contacted HELPS a few months ago and they sent letters on her behalf to her creditors she is a senior on SS her home is homestead without enough income for collection.

 

[quincy]

She contacted HELPS a few months ago and they sent letters on her behalf to her creditors she is a senior on SS her home is homestead without enough income for collection.

Is there a judgment against her already - or was she just served with a summons and complaint notifying her that she is being sued?

If there hasn’t been a judgment yet and if she was served with a complaint, she has a limited time to respond (answer the complaint). If she doesn’t respond or appear at the court hearing, a default judgment can be entered. The time to file an answer to the complaint is (generally) 20 days from the date of service.

Your mom should be able to find an attorney in her area who can help her file the answer and/or advise her on the court appearance and/or file an exemptions claim form with the court. For legal assistance, your mom can try: https://www.texascourthelp.gov

Based on what you have said, it does not appear that your mom has assets that can be seized to pay off your nephew’s debt but the attorney she sees will personally review the facts and give her a better idea. She needs to act quickly though.

Good luck.

 

[Taxing Matters]

If there is already a judgment against her and she was never served the summons and complaint for the claim then there is a good possibility she might get that judgement set aside for improper service. She'd want to see an attorney about that. I'm assuming, though, that as this is the first she's heard of it, that it is likely that she was served with the summons and complaint, not the judgment. If that assumption is correct then what quincy said above is important. She wants to file an answer to the complaint on time to prevent a default judgment, and she may not have a lot of time to do that, perhaps only 20 or 30 days. So this is not something she wants to sit on. As quincy says, she needs to act quickly in this situation. If you can get a look at the documents she was served you can look to see whether it is a summons and complaint, or a copy of the judgment. It'll be pretty apparent which is once you look at it.

 

[mejallen]

Is there a judgment against her already - or was she just served with a summons and complaint notifying her that she is being sued?

If there hasn’t been a judgment yet and if she was served with a complaint, she has a limited time to respond (answer the complaint). If she doesn’t respond or appear at the court hearing, a default judgment can be entered. The time to file an answer to the complaint is (generally) 20 days from the date of service.

Your mom should be able to find an attorney in her area who can help her file the answer and/or advise her on the court appearance and/or file an exemptions claim form with the court. For legal assistance, your mom can try: https://www.texascourthelp.gov

Based on what you have said, it does not appear that your mom has assets that can be seized to pay off your nephew’s debt but the attorney she sees will personally review the facts and give her a better idea. She needs to act quickly though.

Good luck.

She was served a summons and responded directly to the state attorney noted within the 20 days. He said he is in the process of her judgement and had already sent one to the nephew.

A few days later she received a notice to setup a payment plan to avoid this.

They are showing $120k and that is the full amount so that should also be the amount they noted for him to pay. Can she transfer the house to me since I am part owner?
She has called the the advice phone numbers and they saw she will get a call back so she won't leave the house in case they call when she is driving.

 

[quincy]

She was served a summons and responded directly to the state attorney noted within the 20 days. He said he is in the process of her judgement and had already sent one to the nephew.

A few days later she received a notice to setup a payment plan to avoid this.

They are showing $120k and that is the full amount so that should also be the amount they noted for him to pay. Can she transfer the house to me since I am part owner?
She has called the the advice phone numbers and they saw she will get a call back so she won't leave the house in case they call when she is driving.

With what type or types of loans did your nephew finance his education?

Your mom should not set up a payment plan and she should not transfer her interest in the house to you without speaking with an attorney in your area first. Again, based on what you have described, it does not appear to me that your mother will have to pay her grandson’s debt, even though she co-signed on a loan with him 20+ years ago.

Do you know if your nephew looked into any of the loan forgiveness programs available?

 

[LdiJ]

She was served a summons and responded directly to the state attorney noted within the 20 days. He said he is in the process of her judgement and had already sent one to the nephew.

A few days later she received a notice to setup a payment plan to avoid this.

They are showing $120k and that is the full amount so that should also be the amount they noted for him to pay. Can she transfer the house to me since I am part owner?
She has called the the advice phone numbers and they saw she will get a call back so she won't leave the house in case they call when she is driving.

Some of the language you are using makes things a little unclear.

A judgment happens when someone is sued, and the person suing them wins, and the court imposes a judgment against the person losing the lawsuit. The judgment normally results in a lien/levy against the person and/or their assets.

Sometimes there are government entities who can directly place a lien/levy against a person or their assets without going through the court process but that is usually limited to taxing authorities (ie the IRS).

You said your mother was served a summons so the normal assumption would be that she has been sued, and the state's attorney is trying to get her to settle the lawsuit. However some of the language you use makes it sound like she could have already lost the lawsuit, or she is dealing with a government agency who doesn't have to sue to place a lien or levy, or that she has only received a letter threatening to file a lawsuit and trying to get her to set up a payment plan to avoid the lawsuit.

You might get better advice, from anyone you seek it from, if you can be clearer about exactly what is happening right now.

Her social security and her homestead should be protected against any collection efforts. However, in an absolute worst case scenario if they forced the sale of her home in order to get that money from her, your half of the money from the forced sale would be yours and yours alone, it would be protected from them.

 

[commentator]

What on earth kind of student loan did this kid get that would be involved with the state's attorney? I have seen all sorts of collection efforts made on student loans, and I have never heard of something like this one sounds like. I have seen situations where grandparents co-signed 20 years ago, and then were contacted by collections agents from the loan companies who threatened things, but really.....