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Valued Member
spooky
Posts: 62
Registered: ‎08-26-2008
0

Re: whats worse ? foreclosure or defaulting on student loans???

They aretotally PRIVATE loans with Sallie Mae. So Iam screwed ?!? There are no other way, esp with the credit crunch ,will further create a problem getting a lender. My daughter will be going back to school, and we'll try to keep up with the interest at the same time. When the coast is clear, maybe we'll find a lender to refi them, scince SM wont cooperate, and then we'll be okay. In the meantime we'll move out of our house and if we can find a renter, but the mtg will adj from 1500. amonth to 2300. amonth in one year, so I guess the answer here is to try to to sell the house, but if I cant -OH WELL, I'll loose the house because I can re cover from foreclosure than defaulting on PRIVATE SMAE S Loans @ 70K !!  i was hoping to find an alternative, but I guess I was right, foreclosure is better than defaulting on Private loans. OH I agree that if these were Fed we'd have a set of better options, but we dont. TY everyone. Spooky
New Contributor
ssstevie
Posts: 78
Registered: ‎07-17-2008
0

Re: whats worse ? foreclosure or defaulting on student loans???

It is wise to think, "ok, if I foreclose, it will go away soon & I can restore my credit, but if I fail to pay student loans, they will never go away!". 

 

BUT, either way, you will need to pay for a place to stay if you foreclose your home, and you'll be in an even worse situation.  Why is it that you won't refinance?  Honestly, I don't like the idea of folks adding everything to the house, but, it seems like in your situation, to do the right thing for your credit, and quite frankly...our economy, to figure out the best way to pay.  I'd probably refinance in your position, if at all possible.  If you refinance, do NOT hold onto the money and go shopping, but, pay off the loans in full.

 

You can also get a roommate, and/or get some kind of side job.  Sell extra stuff you don't need.  Have equity in your vehicle?  Dump it for a cash car and use that money to help out temporarily.  But, keep your home, if nothing else...

 

 

Valued Member
spooky
Posts: 62
Registered: ‎08-26-2008
0

Re: whats worse ? foreclosure or defaulting on student loans???

First off I have NO equity in my house ! I am in the negative due to the Michigan economy, our nieghbors have lost their homes. We are in the majority of those actually pay our mtg, and always on time, we have no other debts except very a  small balances on our ONE credit acct, and our car payment (again -small) the reason why we are doing great otherwise is because  1. we  only buy what we need, all our furniture is second hand as well as most of our clothes-2. we both work 2 jobs, I sell alot, and guess where it goes-on the MORTGAGE as extra to help build the equity, that is loosing value faster than we can pay off(this includes bonuses !!!!) When we bought the house with no $ down, we were looking at a large bonus coming later that year, that we got and put on the mtg, but as I said, the market tanked here, and I kid you not, alot of the nice houses in my nieghborhood were foreclosed on, other houses have been sitting not selling. I would love to refi, except again-NO EQUITY!!!, So now we want to stop throwing money away, and re think . If Could work more- I would, Theres not much left to sell, and the idea of just renting for a few years cant be that bad. man I am tired!! Thanx for trying, but I ontb think we'll be homelss. Spooky
Valued Member
spooky
Posts: 62
Registered: ‎08-26-2008
0

Re: whats worse ? foreclosure or defaulting on student loans???

 OH , and this idea that I would go shopping HAHaHaHa very funny, the only reason to do a refi is to take out just enough to lower the rate, and lock it in at a fixed rate. At all our past homes, we came out ahead, and never had to refi to do this because we had enough down, and high scores to lock at a low fixed rate.  I am looking into renting out this place,  I still need to either refi (how?) or find a buyer. if the house wont appraise for what I owe, o well to me.
New Contributor
ssstevie
Posts: 78
Registered: ‎07-17-2008
0

Re: whats worse ? foreclosure or defaulting on student loans???

Wow, what a tough hand you guys have to play!  Do you think you could possibly go the roommate route?  I know it'd probably be uncomfortable, but, you will need to do what you have to do to survive, eh?  Also, if you rent the house out, do not forget you will still need to pay rent somewhere else...added to your bad situation.

 

Just keep your home and see what you can do.  Call the student loan folks and let them know your situation.  Assure them you want to pay, but simply cannot, and do not want to create a bad situation or go for BK right now.  See if there is some the type of deferred payment option, or something.

New Member
uk1981
Posts: 7
Registered: ‎10-02-2008
0

Re: whats worse ? foreclosure or defaulting on student loans???

This is easy to answer, do the foreclosure.  The reason is that student loans never can end. The Supreme Court allows collections to continue until death. They can tap your social security, pensions, 401k.  Foreclosures do not.  In fact, walk your house.  It drops off your record in 7 to ten years.  I hope that helps!
Senior Contributor
Wonderin
Posts: 3,494
Registered: ‎05-25-2008
0

Re: whats worse ? foreclosure or defaulting on student loans???


uk1981 wrote:
This is easy to answer, do the foreclosure. The reason is that student loans never can end. The Supreme Court allows collections to continue until death. They can tap your social security, pensions, 401k. Foreclosures do not. In fact, walk your house. It drops off your record in 7 to ten years. I hope that helps!


These are PRIVATE student loans, not Federal. Private student loans don't have the same remedies that Fed loans have.

When a private SL defaults, the private lender has to seek a judgment in a court of law to garnish wages. The amount garnish-able depends on the state's statutes. Also, the state's SoL applies to the judgment itself (not the SL themselves). So if a judgment is attained, and the judgment's good for, say, 10 years, the actions the lender can take (vis a vis, attaching wages) is limited to that amount of time.

Now, a lot of states allow for judgment renewal, which renews the judgment and the time limit the lender has in which to cause remedy (like attaching wages). Most states allow renewal in perpetuity in 10 year increments.

But PRIVATE lenders cannot touch SSI or disability -- or even your 401(k).

~*~*~*~*~*~*~*~*~*~*~*~*~*~*~*~*~*~*~*~*~*~*~*~*~*~*~*~*~*~*~*~*~*~*~*

Hubby's FICOs when we started: high 400s (June 2008)
Hubby's FICO NOW (04/06/09): TU: 679 EQ: 608 EX: ???
My FICOs: TU: 643, EQ: 606
Closed on new home: 1/20/2009 -- If we can do it, YOU can do it!!

Senior Contributor
Wonderin
Posts: 3,494
Registered: ‎05-25-2008
0

Re: whats worse ? foreclosure or defaulting on student loans???

I'd still recommend that you default on the SLs before you foreclose, if at all possible.

Yes, you could get sued for defaulting the SLs and end up facing garnishment (MI is not necessarily a debtor friendly state), and that would amount to roughly 25% of your paycheck being garnished UNLESS you make at or near minimum wage -- at which point, they can't take ANYTHING (though they could seize your bank account -- but that'd be tough, tough, tough for them to do). Even then, you could live a bank accountless life and just do everything with cash or credit cards.

IF you get a judgment against you AND you work out a payment plan, MI will NOT garnish your wages, even if the lender has attained a Writ of Garnishment against you. Courts in MI simply don't allow garnishment if a payment plan is in place.

As I wrote above, PRIVATE student loans, though more expensive and suckier, have less recourses than the US Gov/Federal loans. They can NOT take SSI (Social Security benefits), disability payments, or touch your 401(k) (unless you move it into a bank account).

They CAN have your STATE income tax returns intercepted, though (as apparently, MI allows this). But not your Federal refunds.

While they CAN attach a judgment lien against your home, they can NOT foreclose on you or force you to sell the home to satisfy the judgment. However, if you sell the home, AFTER the first lien is satisfied (AKA, your mortgage) the remaining proceedings will go toward the judgment lien/SL lender.

Not trying to argue, but felt you ought to know what the facts are.

~*~*~*~*~*~*~*~*~*~*~*~*~*~*~*~*~*~*~*~*~*~*~*~*~*~*~*~*~*~*~*~*~*~*~*

Hubby's FICOs when we started: high 400s (June 2008)
Hubby's FICO NOW (04/06/09): TU: 679 EQ: 608 EX: ???
My FICOs: TU: 643, EQ: 606
Closed on new home: 1/20/2009 -- If we can do it, YOU can do it!!

New Member
UBERCOACH
Posts: 2
Registered: ‎04-23-2008
0

Re: whats worse ? foreclosure or defaulting on student loans???

It is not necessary to accept your either or proposition. You may be able to have your student loan transfered to Direct Loans, as was suggested in one of the prior posts. As for your mortage I suggest you look into the new FHA program, effective Oct.1, Hope for Homeowners. Here is the web site link:

 

http://www.hopeforhomeownersprogram.org/

 

I hope this is benefical. Best of luck to you.

Ubercoach

Valued Member
spooky
Posts: 62
Registered: ‎08-26-2008
0

Re: whats worse ? foreclosure or defaulting on student loans???

These again are PRIVATE Sallie Mae loans, can I transfer Private to Direct Loans ?? I absolutly will if I can!! I'll get right on it , but when I went to their site, it says FEderal loans can be transfered and consolidated, nothing about Private Loans -I hope your correct, I'll be all over that if I can, but it doesnt look like it to me. I also went to the other site hopeforhomeowners.org, and all  get there  is an add for hosting websites. Thanks spooky


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