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WALLSTREETESQ
WALLSTREETESQ, Attorney
Category: Bankruptcy Law
Satisfied Customers: 15239
Experience:  14 years exp., CH 7 AND 13 Bankruptcy cases, AFL-CIO UNION PLUS, UFT NYSID AND ALL MAJOR UNIONS
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My father filed for BK - CH7 because he was cosigned on so

Customer Question

My father filed for BK - CH7 because he was cosigned on so many of my (private) student loans. The best he could do was discharge his credit card debt. Attorneys said the student loans would remain entirely unaffected since they can't be discharged, not included in the BK. One of the student loans defaulted after his BK, for which payments were always consistent - though we didn't pay when they didn't bill, they seemed to follow the protection time period during which creditors are all at bay during BK (right?) - granted I'm the primary. Their explanation: "because it's policy to default a loan if either signer declares BK." This was interesting since the same bank held another of our student loans and didn't default that one - nor did any other lender. Pymt history excellent on all of them. Were they legally justified in defaulting the loan? If not, how may I get someone to do something about it, because I've had no luck on understanding the situation.
Submitted: 3 years ago.
Category: Bankruptcy Law
Expert:  WALLSTREETESQ replied 3 years ago.

WALLSTREETESQ :

Hello I am a licensed attorney here to help you with your question, please review my response and do not hesitate to ask for clarificati on.

WALLSTREETESQ :

When he filed bankruptcy were payments made on time to the student loans?

Customer :

Yes, until they stopped sending stmts. During which time I called since we weren't being billed, they said that it was in some sort of grace period to align with the other loans...it's written down somewhere...when we weren't billed, we didn't pay

WALLSTREETESQ :

That is not common, however not against the law, unless it is specifically written in the studet loan documentation.

WALLSTREETESQ :

All guaranty agencies and the U.S. Department of Education (ED) will accept regular monthly payments that are both reasonable to the agency and affordable to you, so even if they did put the amount on default they would still have to make arrangements to allow you to pay.

Customer :

We've managed to get payment arrangements, but it's reported negatively every month.

WALLSTREETESQ :

I would also have your father bankruptcy attorney send a letter to the bank, stating that he had been paying the loan on time, and that their is no reason justified for the loan to have been defaulted.

WALLSTREETESQ :

If it is being reported negatively every month, and their is no justification for that, I would consider filing a Federal Complaint under the Fair Credit Reporting Act, with the FTC. This should be sent in a letter also.

Customer :

The BK attorney made many phone calls at our prodding

WALLSTREETESQ :

Their should be no negative rating, unless they claim he has missed a payment.

WALLSTREETESQ :

You should contact them in writing stating you will be filing a complaint and lawsuit with the FTC if they do not stop their actions. If you review the link above, you have certain rights to know what is being reported on your credit and why.

WALLSTREETESQ :

At this point, thei seems the only way to get this resolved.

Customer :

well, the negative is that it's in collections

Customer :

Which is true

Customer :

they at first pulled it from their original servicer, AES, and put it with a collection agency

WALLSTREETESQ :

If you have paid on time their is no reason for it to be in collections, unless you did not pay them when he was in bankruptcy.

Customer :

at our prodding, and the attorney's, they pulled it to their internal recovery

Customer :

We didn't pay during his BK because they stopped billing, and when I called they said not to

WALLSTREETESQ :

After the bankruptcy did you pay the balance?

Customer :

No, we're still paying on it

WALLSTREETESQ :

That would be the reason it is negative, typically during a bankruptcy filing, you would pay all non discharged debts,

Customer :

My dad didn't pay any of his non discharged debts

WALLSTREETESQ :

after the bankruptcy which typically is three months, if you did not pay the 3 months owed would have to be paid upfront.

Customer :

those included were cleared, those weren't, weren't

WALLSTREETESQ :

He didn't pay his mortgage?

WALLSTREETESQ :

Or car loan?

Customer :

He paid on them, he didn't pay them off

WALLSTREETESQ :

That is what I am suggesting, he had to make the regular payments on the secured debts,

WALLSTREETESQ :

the loans sould have been paid monthly as well.

Customer :

We planned on paying the student loan, but the holder of the loan said not to...hard to pay them if they tell you not to

WALLSTREETESQ :

You are correct,

Customer :

And they didn't say it was related to the BK that we weren't paying, they said it was being aligned with the other loans

WALLSTREETESQ :

However, they may have wanted the arrears all at once.

Customer :

it was already in collections by the time they wanted anything

Customer :

they refused to remove the defaulted status from the get-go

WALLSTREETESQ :

They have made a mistake, however the reason is clear because the did not get payments during the bankruptcy.

Customer :

The servicer says all pymts were timely, and then the bank pulled it back, and the servicer doesn't know why

WALLSTREETESQ :

Your only option is to consider a FTC complaint and state they advised you not to pay your student loan, and then defaulted you, hurting your credit.

Customer :

But, they said the reason was because it's policy to default a loan when either signer declares BK even if loan not included in BK

Customer :

but, if that were policy, they would've defaulted the other loan they hold, one would think...and likely one of my several other loans would've defaulted as well

WALLSTREETESQ :

That default if cured should not hurt your credit, if you made payments.

WALLSTREETESQ :

They have messed up, and to have the problem solved file a complaint with the FTC.

WALLSTREETESQ :

I have never hear of many student loans not accepting payments during a bankruptcy filing, or defaulting when a co signor files

WALLSTREETESQ :

They most likely defaulted you when they did not receive payments during the bankruptcy.

WALLSTREETESQ :

If you have any further questions please do not hesitate to ask.

WALLSTREETESQ :

If satisfied please press the accept button so we can receive credit, thank you and do file the FTC complaint as it is free and they will investigate.

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