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JoeLawyer
JoeLawyer, Attorney
Category: Bankruptcy Law
Satisfied Customers: 767
Experience:  Attorney in the practice of Bankruptcy Law since 1996
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Ive been out of work for 1 year and a half and half been looking

Customer Question

I've been out of work for 1 year and a half and half been looking for work. I've made a grave mistake and had my mother cosigned on private student loans which have ballooned to 92,000 dollars. I went to school in London and the exchange rate was 2 to 1. I was looking into bankruptcy but understand that would leave my mother in a lurch as she is retired. I know that if pay 1100 dollars a month for 2 years the cosigner is eligible to be signed off the loan. I know i can't pay that unless I borrow from people. Are there any other options if any to either 1) get her off the loan, and/ or 2) file for banruptcy without my mom being at risk.

p.s. I do know it is difficult to get a bankruptcy loan on private loans at the moment. But I also know that there is a bill is being considered by Congress that would make private student loans like other loans. I am assuming that would take a few years though.
Submitted: 4 years ago.
Category: Bankruptcy Law
Expert:  JoeLawyer replied 4 years ago.
Hello mpt:

I'm sorry to hear about your situation.

Unfortunately, it is unlikely that bankruptcy will help you significantly. First, as you indicated, discharging student loans in bankruptcy is very difficult. In order to do so, you have to file an Adversary Proceeding against the lender, which is a separate lawsuit during your bankruptcy case. In the Ad Pro you have to convince the court that repayment of the student loan causes such an undue hardship on you or a dependent that the loan should be discharged (see 11 U.S.C. 523(a)(8), HERE).

This standard of undue hardship is very difficult to meet. I read a case where a borrower was injured in an accident and paralyzed from the waist down. Borrower filed bankruptcy and Ad Pro to discharge student loans. Ruling: Student loans NOT discharged because borrower was physically capable of working a desk job.

Mainly, the only people I have seen have much success discharging student loans are older people who are living on social security and will never likely be able to work again.

Another angle is to try to show that the loans you have do not fall into the category of protected loans in 11 U.S.C. 523(a)(8), which means you have to show that your student loan is NOT "(i) an educational benefit overpayment or loan made, insured, or guaranteed by a governmental unit, or made under any program funded in whole or in part by a governmental unit or nonprofit institution; or (ii) an obligation to repay funds received as an educational benefit, scholarship, or stipend; or (B) any other educational loan that is a qualified education loan, as defined in section 221(d)(1) of the Internal Revenue Code of 1986, incurred by a debtor who is an individual."

This also can be pretty tough to do, especially since "an obligation to repay funds received as an educational benefit" is pretty broad.

Another issue is that most (if not all) attorneys will charge additional fees over and above what the bankruptcy cost for the Ad Pro, fees which you won't get back if you lose the Ad Pro. Ad Pros can get expensive since the lenders often defend them, causing them to go to trial in many cases. Of course I do not know the exact details of your case so this may not apply to you, but many persons seeking to discharge student loans find themselves in the position of having to front $4,000 (or whatever an Ad Pro might cost) for a 5% chance to get rid of their loans.

Finally, even if you do succeed in an Ad Pro, this will not help your mother. Your bankruptcy discharge would not protect her; she would have to file her own bankruptcy and succeed in her own Ad Pro to keep the lender from being able to pursue her.

However, depending on your mother's age and financial situation, she may be able to file bankruptcy and show undue hardship. If she is living on social security, she would likely have a better chance than you at getting the loans discharged.

You might want to meet with an attorney in your area and give them the facts of your case and you and your mother's financial situation and see what the attorney says. A local attorney would have some knowledge if the disposition of your Bankruptcy Court when it comes to student loan discharge, and many attorneys offer free consultations.

Regarding getting your mother off the loan, I doubt if the lender will let your mother off the hook. The only way to get her off the loan is if you can refinance it in your own name, which is very unlikely. First, it is hard to get an unsecured loan for $92,000, and second, doing so after being unemployed for a year is next to impossible.

Others options are to seek cancellation, deferment or forbearance of the loans due to your unemployment. You can read more about these options HERE.

I'm sorry I didn't have the best news, but I thought you would prefer to get a straight answer rather than being told what you wanted to hear even if it would not come to fruition for you.

Good luck.
Joe

LEGAL NOTICE: I am only licensed to practice law in certain state(s) and I cannot give legal advice to someone who does not reside in a state in which I am licensed, nor shall anything I say in the above answer or elsewhere on this site be deemed legal advice, even to someone who resides in a state in which I am licensed. Fees I receive for answering questions are paid for information, not for legal advice. This forum is designed to provide general information only, and information herein is not warranted to be correct or applicable in any way since laws may have been misinterpreted herein, since laws change from time to time, and since the impact of those laws on any particular situation varies. The information presented in this site shall not be construed to be formal legal advice nor the formation of an attorney-client relationship. Persons accessing this response are encouraged to seek independent legal counsel in their jurisdiction for guidance regarding their individual circumstances. Do not take any action or inaction based on information presented herein since it is informational and may not be accurate or applicable to you; it merely attempts to give you a basis of knowledge to help you formulate questions to ask a legal or other professional in a face-to-face meeting in your jurisdiction. Joseph Ross does not hold himself out to be a specialist or expert in any area, regardless of assertions made by any third party, and any implication of being an expert or specialist herein is made in error. I hope the information presented above is useful to you. Answer above is (c) Joseph Ross. All rights reserved.

Edited by Joseph Ross on 5/9/2010 at 1:32 PM EST
JoeLawyer, Attorney
Category: Bankruptcy Law
Satisfied Customers: 767
Experience: Attorney in the practice of Bankruptcy Law since 1996
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Customer: replied 4 years ago.

I've spoken to Sallie Mae about signing my mother off the loan. They said that after 2 years of paying on time and them making the necessary checks on my credit and such, it can be done. How likely is this going to happen?

 

What is the worst that can happen to my mother if the loans go into default.

 

The other option I've heard of is to consolidate my loans after a certain amount of time and my credit is acceptable. Supposedly consolidating will take my mom off the loan.

 

Obviously, my mother is of first importance. She is 66.

 

Thank you so much once again for your answer

Expert:  JoeLawyer replied 4 years ago.

Obviously, my mother is of first importance. She is 66.

 

Understood.

 

I've spoken to Sallie Mae about signing my mother off the loan. They said that after 2 years of paying on time and them making the necessary checks on my credit and such, it can be done. How likely is this going to happen?

 

That's hard to say since whether they will or will not do it is such a case-sensitive decision, but in my experience is it difficult to accomplish.

 

What is the worst that can happen to my mother if the loans go into default.

 

They can sue her for repayment, ultimately allowing them to get judgment liens on any real estate she owns (if she lives in a State which allows such, and most do) or garnish wages. If she is retired and does not have wages, and if she does not own real estate (or lives in one of the few States where judgment liens cannot attach to real estate), then she may be judgment proof and there is not much they can do to her.

 

The other option I've heard of is to consolidate my loans after a certain amount of time and my credit is acceptable. Supposedly consolidating will take my mom off the loan.

 

I believe this is accurate. A consolidation is usually a new loan, like a refinance, and if she does not sign the refinance papers then she will not be liable.

 

LEGAL NOTICE: I am only licensed to practice law in certain state(s) and I cannot give legal advice to someone who does not reside in a state in which I am licensed, nor shall anything I say in the above answer or elsewhere on this site be deemed legal advice, even to someone who resides in a state in which I am licensed. Fees I receive for answering questions are paid for information, not for legal advice. This forum is designed to provide general information only, and information herein is not warranted to be correct or applicable in any way since laws may have been misinterpreted herein, since laws change from time to time, and since the impact of those laws on any particular situation varies. The information presented in this site shall not be construed to be formal legal advice nor the formation of an attorney-client relationship. Persons accessing this response are encouraged to seek independent legal counsel in their jurisdiction for guidance regarding their individual circumstances. Do not take any action or inaction based on information presented herein since it is informational and may not be accurate or applicable to you; it merely attempts to give you a basis of knowledge to help you formulate questions to ask a legal or other professional in a face-to-face meeting in your jurisdiction. Joseph Ross does not hold himself out to be a specialist or expert in any area, regardless of assertions made by any third party, and any implication of being an expert or specialist herein is made in error. I hope the information presented above is useful to you. Answer above is (c) Joseph Ross. All rights reserved.
Expert:  JoeLawyer replied 4 years ago.

Obviously, my mother is of first importance. She is 66.

 

Understood.

 

I've spoken to Sallie Mae about signing my mother off the loan. They said that after 2 years of paying on time and them making the necessary checks on my credit and such, it can be done. How likely is this going to happen?

 

That's hard to say since whether they will or will not do it is such a case-sensitive decision, but in my experience is it difficult to accomplish.

 

What is the worst that can happen to my mother if the loans go into default.

 

They can sue her for repayment, ultimately allowing them to get judgment liens on any real estate she owns (if she lives in a State which allows such, and most do) or garnish wages. If she is retired and does not have wages, and if she does not own real estate (or lives in one of the few States where judgment liens cannot attach to real estate), then she may be judgment proof and there is not much they can do to her.

 

The other option I've heard of is to consolidate my loans after a certain amount of time and my credit is acceptable. Supposedly consolidating will take my mom off the loan.

 

I believe this is accurate. A consolidation is usually a new loan, like a refinance, and if she does not sign the refinance papers then she will not be liable.

 

LEGAL NOTICE: I am only licensed to practice law in certain state(s) and I cannot give legal advice to someone who does not reside in a state in which I am licensed, nor shall anything I say in the above answer or elsewhere on this site be deemed legal advice, even to someone who resides in a state in which I am licensed. Fees I receive for answering questions are paid for information, not for legal advice. This forum is designed to provide general information only, and information herein is not warranted to be correct or applicable in any way since laws may have been misinterpreted herein, since laws change from time to time, and since the impact of those laws on any particular situation varies. The information presented in this site shall not be construed to be formal legal advice nor the formation of an attorney-client relationship. Persons accessing this response are encouraged to seek independent legal counsel in their jurisdiction for guidance regarding their individual circumstances. Do not take any action or inaction based on information presented herein since it is informational and may not be accurate or applicable to you; it merely attempts to give you a basis of knowledge to help you formulate questions to ask a legal or other professional in a face-to-face meeting in your jurisdiction. Joseph Ross does not hold himself out to be a specialist or expert in any area, regardless of assertions made by any third party, and any implication of being an expert or specialist herein is made in error. I hope the information presented above is useful to you. Answer above is (c) Joseph Ross. All rights reserved.

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