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socrateaser, Attorney
Category: Bankruptcy Law
Satisfied Customers: 39039
Experience:  Attorney and Real Estate Broker -- Retired (mostly)
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I am a student loan debt slave. Here is a readers digest

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I am a student loan debt slave. Here is a reader's digest of my story:

I finished borrowing in the mid 1990's. I was married in 1997. My (now ex) wife and I acquired some credit card debt early in our marriage. We got to a point where she found it necessary for us to file bankruptcy. I didn’t want to, but we ultimately did file. The lawyer was able to negotiate a loan modification for the student loans. I was to pay $120 per month for 25 years and have the remainder forgiven at the end of 25 years. At which time, the forgiven amount was going to be reported as income for me to pay income tax on. I followed that plan for several years (through most of 2005).

Eventually, a representative from ACS contacted my wife and convinced her to consolidate the loans with them. They promised to lower the monthly payment (without any knowledge of the modified loan agreement). They sent her the promissory note and she signed my name to it without my knowledge or consent. The years that I was paying in accordance with the modified agreement, the interest on the loans was compounding. So when I received a bill from ACS for $700 per month, I was completely shocked. I contacted ACS to complain and to restore my modified agreement. They said that nothing can be done. So I started paying ACS and applying for IBR and using my forbearance and deferment. Now, I owe ACS $130,000 on my student loans, and they are very close to being in default and collection. I am beginning to do the research I should have done in 2005. It is my understanding now that under the implied covenant of good faith and fair dealing, that the originally promissory note may be defective without my signature and therefore in breach by ACS for knowingly discussing the loan and closing the deal with my wife. So I have recently filed a voluntary statement with the police department claiming that the signature was a forgery. Also, my ex-wife is willing to depose the facts that establish that the whole deal was made without my knowledge or consent. Also, I have learned that under the doctrine of lender’s liability, that ACS may have engaged in predatory lending practices for not acting in my best interest in the loan application. What are some actions I can take to change my situation?

In which year did you file bankruptcy?

Was it a Chapter 7 or 13?

Thanks in advance.
Customer: replied 4 years ago.

The bankruptcy was in 1999 chapter 7. But the student loans were not included in that. I mentioned it because the same attorney that processed the bankruptcy negotiated the modified agreement with the lender (Direct Loans at that time).

Okay, thanks!

The problem you're up against is that you made payments against the note. By doing this, the lender could claim and the court could find that you "ratified" your spouse's signing of the note as your agent. See Theis v. duPont, Glore Forgan Inc., 212 Kan. 301 (KS 6/09/1973)(An “ostensible agent” or “apparent agent” is one whom principal has intentionally or by want of ordinary care induced and permitted third persons to believe to be his agent even though no authority, either express or implied, has been conferred upon him; ratification by principal of an unauthorized act of his agent is equivalent to original grant of authority).

I believe that your having tried to pay according to the allegedly forged note would operate to ratify the loan agreement.

This leaves you with bankruptcy, again, as your only reasonable option. Only this time, you would try to have the loan discharged on grounds that you satisfy the "undue hardship" requirements of Bankr. Code 523(a)(8), as applied to Kansas bankruptcy actions in the case of EDUCATIONAL CREDIT MANAGEMENT CORP. v. POLLEYS, 356 F.3d 1302 (2004), in which the U.S. 10th Circuit Court of Appeals held that the bankruptcy court must consider:

  1. the debtor's past, present, and reasonably reliable future financial resources;
  2. a calculation of the debtor's and her dependent's reasonable necessary living expenses; and
  3. any other relevant facts and circumstances surrounding each particular bankruptcy case.


"Simply put, if the debtor's reasonable future financial resources will sufficiently cover payment of the student loan debt-while still allowing for a minimal standard of living-then the debt should not be discharged." Polleys, at 1308.

The 10th Circuit has given bankruptcy courts more latitude than exists in most other federal circuits, so a student loan discharge is easier to get. However, don't be misled by this, because it's still not easy. You must show that under the "totality of the circumstances," you will be unable to repay the loan during your lifetime.

If you proceed down this path, you will need a bankruptcy lawyer who has experience and previous success in obtaining a student loan discharge, because it's very difficult to accomplish, and I would be willing to bet that only one out of 100 bankruptcy lawyers have succeeded in the past. So, you will have to shop your case until you find the right person.

For some possible referrals, in the Kansas jurisdiction, see this link.

I realize that you are looking to show that you were defrauded by the lender and your ex -- but, since the statute of limitations for fraud in Kansas is two years from the date of discovery, your time to accomplish this, even if you could avoid the ratification issue, has long ago passed.

Please let me know if I can be of further assistance.
Customer: replied 4 years ago.

I am getting my ex wife to sign an affidavit that establishes that was never in agreement with her acting on my behalf and that she was not qualified or competent to act on my behalf. I am also going to put together an affidavit that establishes that I attemted to have ACS restore my modified agreement plan in august of 2005. And that they were aware of the fraudulent signature and refused to fix it. I didn't pay as an agreement, I payed because I felt trapped. Also, I can prove that the consolidation worsened my financial situation. I am now aware of a doctrine of lender's liability that obligates the lender to act in the best interest of a borrower. failure to do so, is actionable as predatory lending. So I'm not charging anyone with fraud or forgery. I'm saying that the missing element of the contract nullifies the contract and that the lender was negligent and liable for securing the loan without my consent or best interest. Please review this video by Carl Person. It has inspired me to do some research, but I still have doubts about the advice.

What I'm hearing from the video is that (1) the attorney claims he can get rid of your debt under an as of yet, untested legal theory; and (2) that he can practice in an U.S. jurisdiction.

For #1, when the attorney can cite an appellate law case that supports his being able to accomplish the asserted goal, under circumstances that mirrors your circumstances, in Kansas, then I'll take his commentary seriously. Until then, this is an extremely speculative position -- and while I certainly do not suggest that the attorney may be able to prevail -- if you jump into this pool, then you will be paying that bill -- without much certainty in the outcome of the prospective case.

For #2, the fact that any attorney can represent a person in a jurisdiction where the attorney is not licensed (i.e., "pro hac vice" representation), in order to actually accomplish this, the attorney must apply to the court where the case is pending for permission, and associate with local counsel -- which is a subtle way of saying that you will be paying for two lawyers to handle your case simultaneously. Also, most lawyers will not associate with out-of-state counsel, because if something goes wrong, the in-state counsel will be liable for the other attorney's malpractice. Only lawyers who carry huge amounts of professional liability insurance can take on this sort of risk, and that usually means a very large law firm with very expensive lawyers. So, why wouldn't you just hire the very large law firm, instead of the out-of-state lawyer who promises that he can win your case, where no one else has been able to do so previously.

The bankruptcy discharge option, while it is admittedly difficult to win, seems to me at least to have a lot of supporting case law, and there are attorneys who have been successful with this approach. So, on a pure risk-reward calculus, the bankruptcy option seems to me a much lower risk.

Moreover, and once again, I believe that you will be stopped dead in your tracks by the two-year statute of limitations for fraud, applicable to Kansas and federal courts sitting in Kansas. So, even if you were to prove that your ex intentionally defrauded you, to injure you out of spite, you could not maintain a lawsuit against her. The same applies to the lender. You've been paying on the debt for years. Put yourself in the shoes of a juror and ask yourself who you would believe concerning the issue of whether or not the signature on the note was authorized by you, once the jury is informed that you've been paying on the debt since 2005. You would probably say to yourself, "I think this person is just looking for a way out of this lawfully-incurred debt. I have debts, and I pay them -- so, I don't see why I should let this person out of the deal."

I'm pretty good at stepping into the shoes of a judge and determining how a case will eventually result. On this website, after answering more than 25,000 questions during the past five years, I've been wrong about 12 times. So, while I understand what you're trying to prove, and while I have enormous sympathy for your circumstances, I believe that you will ultimately find that you're only real option is to file bankruptcy and prove the "undue hardship" exception to Bankr. Code 523(a)(3).

That said, I would investigate the other attorney's claims directly. Contact him and see what he will actually promise you in writing -- and how much he will charge. No point in speculating -- just be aware that attorneys are very good at convincing others to their position (including me) -- so, you have to sit back and think hard about whether or not someone's opinion is firmly founded in verifiable statutes and case law -- or, whether the opinion is based solely upon that person's claim that they know what they're talking about.

I don't expect you to believe anything that I say -- which is why my answers come with the case law and statutes, so that you can review them for yourself and make up your own mind.

And with that, I believe that I have "covered the waterfront."

Best wishes and good luck with your circumstances.

Hope this helps.
Customer: replied 4 years ago.

Thank you for your very informative discussion. I think you have given me valuable advice and I plan on rating you with excellent feedback. I have one quick thing to point out. The case you refer to seemed to fail ratification where repudiation was expressed. I have always claimed that I contacted ACS immediately as soon as I became aware of the agreement my ex wife made. The person I contacted convinced me that the bureaucracy was too big and powerful for me too deal with. I continued to repudiate with sluggish payments, using up all of my forbearance and deferment. I am guilty of allowing myself to be bullied by a big bureaucracy and not fighting back like a brave red blooded American should. I think a jury could sympathize with me. You do... Right?

Let's say that you stop paying and you're sued to obtain a money judgment so that your wages can be garnished. You deny entering into the loan contract, but you admit to making payments on the loan. Who makes payments on a debt that they do not owe?

In the world of ordinary people, the answer is "no one."

So, while I personally sympathize with you as the underdog, I do not believe that a jury will sympathize, because your defense will be viewed as unbelievable -- and you will lose as a consequence.

Hope this helps.
socrateaser and other Bankruptcy Law Specialists are ready to help you
Customer: replied 4 years ago.

Thanks. I have a familiar feeling that I had in 2005. I feel like I'm defeated before I ever started. That doesn't mean I was I wrong then, and it doesn't mean that I'm wrong now. The difference is that then, I wasn't in the corner that I'm in now. I guess I was willing to put up with a world of "ordinary people" that promise to lower payment, but quadruple it instead, and that will enforce a loan no matter how illegal it is, and that will qualify a borrower with a fresh bankruptsy, because they don't care if I default. In fact, they want me to, because I will be their slave for life if I do. Yeah, I paid the bill. Maybe I really deserve everything they want to do to me I guess. After all, they are good people. I'm just a guy trying to avoid paying for all the service that have provided me. I am probably getting in their way of all the valuable contribution they make to society. Or maybe, someone needs to finally get fed up with the banks producing nothing but debt. That is really their product. They take people as their resource, and run us through their production processes and magically create debtors. For who? Society? Hell no! They have us all by the balls, and I am finally ready to stand up to they sneaky tyranny called student loans. I may not be able to get anyone to stand with me right now. Carl Person won't. He's too busy for me. But he is right. They can't sell my blood yet. I will remain confident that someone will see it my way and get fed up with me, and use their expertise as a weapon against the billionaires who want to sell my blood and yours. And they will do anything to take our livelyhood because we will let them. I let them in 2005, so therefore, I should let them do it to an ever increasing extent. Wow, sorry for the rant. I am really sick of this world of "ordinary people". I'm hopeful that I can compel some people to stop being ordinary. Thanks for listening, and thanks for your expert advice.

It's true, you cannot be imprisoned for debt (cf., child support). So, if you don't pay, then all the lender can do is pursue your assets and income. You can always work for cash -- it just makes life a little more difficult.

I had a client once with a $2 million dollar judgment against him for fraud. He didn't really commit fraud, but by the time he found me, his lawyer told him to not bother defending the case, and a judgment was entered against him. That judgment prevents him from filing bankruptcy.

But, he doesn't care, because he works his job, and pays the 25% garnishment, after tax, and he goes on with his life, as if he's being taxed higher than normal.

He'll never pay the judgment in full, unless he wins the Powerball lottery. But, that's just the way it is -- life goes on, anyway.

You could be in the same situation. Or, maybe you can make the bankruptcy work. Or, maybe you'll make a fortune in some business enterprise and pay the debt off in full.

Only time will tell.

Note: No need to respond. Best wishes.
Customer: replied 4 years ago.

One last reply. Just yes or no. Were they in the wrong in 2005.. ACS?

I won't reply to the answer, so just wanted to say thanks again sir.

If the lender induced your spouse to sign the note on terms that were inferior to the terms you already had, or they induced your spouse to sign your name on the note without your consent, then that would have been wrong, in my opinion.

Best wishes.