17 Year Defaulted School Loan

[MeBLady]

What is the name of your state? CA

I have a 17 year old defaulted school loan<s> GSL, SLS, federally backed.

I attended the school for less than three months, was not entitled to a refund. I filed a Chapter 7 BK 10 years ago, and mistakenly thought this debt was dischargeable. I haven't had contact with my lender since the BK discharge.

The other day, I received a notice from a collection agency demanding payment of over $17,000 -- triple the amount of the original loan.

I immediately called them, qualified for "rehabilitation", but am not able to afford the minimum payment they need for the amount of the loan. I am unemployed, a housewife dependant on my husband's income with two children. This debt was incurred long before I married him.

The only asset we have is our home (jointly owned), with very little equity at this point. However, I fear a judgment and a lien when I do have enough equity to attach, and sitting in a position that I will probably never be able to afford the payments they want.

Obtaining a loan with lower interest, or even using a credit card to pay them off, is not an option at this time and would put me in severe financial distress.

What are my options? Is there any way to protect my home?

 

[bigun]

During that time period, under certain circumstances, student loans were dischargeable. The law was changed in 1998 {I think}. Is the lawyer who handled your bk still in business? I'd suggest contacting him/her for some information.

 

[MeBLady]

I filed in pro per, though I did receive a legal consulation who advised me to include them as a creditor and "say nothing". If they didn't dispute, I was safe.

The law at the time stated the types of loans that I had were dischargeable if they were at least seven years old before coming due and payable, or if they would prove to be a financial hardship to repay. Though the loans WERE seven years old, I got deferments for two years shortening the time they were payable to five years.

The Dept. reported the loans to all credit reporting agencies as having a zero balance after my discharge. No problems getting an FHA for my home loan, I even took a second mortgage and later refinanced again without any problems. They also claim that the "zero balance" on my many credit reports was the mistake of the three major credit bureaus, and that they have never stopped attempting to collect this debt even though I have never heard from them, and they had my current address.

 

[Skylyn]

Get a job and pay them. This isn't going to go away. You don't have enough "hardship" to have these forgiven. Until you get them rehabed or consolidated, I wouldn't file taxes jointly with your husband...

 

[bigun]

Well, you know that it ought not to have been discharged but, the collection agency may not.
I'd send a letter {CRRR} explaining the loan was IIB and send the stautory language of the law at the time you filed and see what they say. Demand proof the debt should not have been discharged and demand a complete accounting.

 

[Skylyn]

"Well, you know that it ought not to have been discharged but, the collection agency may not.
I'd send a letter {CRRR} explaining the loan was IIB and send the stautory language of the law at the time you filed and see what they say. Demand proof the debt should not have been discharged and demand a complete accounting."

And of course, since this is a federal student loan, they'll laugh at this. The fed's collection agencies are dumb, but not that dumb (and they'll know this wasn't discharged and they'll have the paperwork for a "complete accounting")... But let's say you do fool this agency, it'll eventually get sent to another, and then another, and then another... As I said, "Get a job and pay them. This isn't going to go away. You don't have enough "hardship" to have these forgiven. Until you get them rehabed or consolidated, I wouldn't file taxes jointly with your husband..."

 

[bigun]

And of course, since this is a federal student loan, they'll laugh at this. The fed's collection agencies are dumb, but not that dumb (and they'll know this wasn't discharged and they'll have the paperwork for a "complete accounting")...

You need to read the post again. It was discharged. The onus will be on them to prove the discharge was not proper and from what I've seen of ca's dealing with very old debt, there is a real chance they have nothing.

BTW, even if they are collecting student loan debt, they are bound by the FDCPA and must furnish validation .

 

[Skylyn]

From the op, "mistakenly thought this debt was dischargeable." She had to bring the advisarial proceeding. She didn't. It wasn't discharged. It will be up to her to prove that it was (of course, she won't be able to do this). The fed knows this, and they turned it over to the CAs.

"and from what I've seen of ca's dealing with very old debt, there is a real chance they have nothing."

a- The CA doesn't own this debt, the government does, and they have the paperwork, if needed.

b- Even if they don't produce the paperwork, what's the OP going to do? They can garnish her wages, take her tax returns, etc., without it.

"BTW, even if they are collecting student loan debt, they are bound by the FDCPA and must furnish validation"

Sure, she could ask for validation, then, the CA (assuming they don't want to go through the hassle of validation) will just return the account to the Dept of Ed, who will then take action as the OC (see point b above).

 

[bigun]

The Dept. reported the loans to all credit reporting agencies as having a zero balance after my discharge

As I read the post, she did list it on her petition and it was discharged. If the Dept. of Ed. reported a zero balance, I doubt they do have the paperwork. If they did, I think they'd have made a move well before now.
I'd stick to my guns and make them prove the discharge was improper. After all, she has a piece of paper with a federal judges signature on it saying it's proper.

BTW, she's not working so nothing to garnish though, it would be wise to file taxes separatly until this is sorted out.