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Regular Contributor
Posts: 161
Registered: ‎10-11-2013
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My journey with rebuilding credit after a total and permanent disability discharge

I had my federal loans discharged in September 2011. Most of my loans were 120+ days delinquent at the time due to me thinking I had no options left. I'd been disabled for a few years already and had used up all of the various deferments. So I applied for a total and permanent disability discharge. It was approved pretty quickly. What they don't tell you about is that you're sent a form from the IRS and are responsible for the taxes on however much your discharged loans were. I believe I'm considered "Insolvent" or something cool sounding like that, which means IRS isn't going to bug me. I hope...

Recently I've gotten on a kick to rebuild my credit, so I've been lurking here and have found tons of helpful info, thanks to you all! I pulled all 3 of my free credit reports. The discharged loans appear on all 3 report as the dept of education, with a $0 balance, and current paying as agreed. A-ok there. However on all 3 reports I had some trace of my original loan holders, one stating a current status of 120+ past due, despite the remark included that they've been assigned to the government. What I don't know, is whether those records are even supposed to legally be in my file? I've been all over the internet and the only thing I've found that comes close to answering my question is this from Nelnet  http://www.nelnet.net/media/newsletters/CB_ReprtPermDisbDisc.asp

But I'm not quite sure if I understand it entirely. Spoke to a lady at Experian today and she said to contact the original lenders. That I may need to send them the disabilty discharge papers. If anybody has any info or advice that will help in any way, please let me know! I'll be popping back in with more info as I go along, I'm hoping it will help someone else eventually.

Beginning Scores 9/13: EX 651, TU 639 Short term goals: Scores in the mid 700s 1/15 TU08 701
CapOne Quicksilver $4000 | Sallie Mae World Mastercard $4400 | Barclaycard Rewards Mastercard $2500 | Amex Everyday $6000 | Discover It $2500 | Walmart Mastercard $6000 | BofA Cash Rewards $1200 | CareCredit $700 |
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Regular Contributor
Posts: 161
Registered: ‎10-11-2013
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Re: My journey with rebuilding credit after a total and permanent disability discharge

Had a somewhat productive day on the phone trying to hunt down info. I was trying to get a hold of someone at Wells fargo/AES to tell me any info about the 2 loans showing as 120 days past due. AES basically said they no longer have any info on them, they're assigned to the dept of education. Wells Fargo couldn't find any trace of it in their systems. Equifax advised trying to get the lender to report correctly. Seeing as they can't even locate the loans I'm wondering whether I should just file a dispute with the credit agencies? Any advice on that from anyone? How to go about it and such.

One helpful representative advised me to call the Dept of Education for info, couldn't believe I hadn't thought of that as they are the ones who now hold the discharged loans. Sadly they're closed for the government shutdown. I need to find out whether having any negative information showing is even what the agencies are supposed to do.

 

Beginning Scores 9/13: EX 651, TU 639 Short term goals: Scores in the mid 700s 1/15 TU08 701
CapOne Quicksilver $4000 | Sallie Mae World Mastercard $4400 | Barclaycard Rewards Mastercard $2500 | Amex Everyday $6000 | Discover It $2500 | Walmart Mastercard $6000 | BofA Cash Rewards $1200 | CareCredit $700 |
Gardening as of 1-14-15
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Regular Contributor
Posts: 161
Registered: ‎10-11-2013
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Re: My journey with rebuilding credit after a total and permanent disability discharge

Update 10-23

 

I finally got some info on how the loans are supposed to appear on a credit report. Talked to someone at the Dept. of Education, reached them through the ED Ombudsman office where a service rep takes down your info and then a specialist returns your call later, # is 1-877-557-2575. She told me the loans are supposed to show up on your CR with the Department of Education (mine shows on one CR report under the name TPD servicing), original $ amount and such, and as "paid or pays as agreed" for the status. The servicer of your loans are also allowed to report on your CR. If you were smart, unlike me, I believe it will reflect all of your positive payments made with a final status of "assigned to government" or "paid in full, assigned to government". Be aware that if you had late payments or a default it will show in your payment history. So don't lag (like me) and explore every option for forbearance, deferment and such before things get to a serious point. Also don't forget that discharging the loans through disability will also mean you receive an 1099 from the IRS for the discharged loan amount, and unless you are insolvent you will be expected to pay taxes on the amount.

 

My AES loans are still reporting as 120+ days past due, the rep at AES says the current status is actually "assigned to government", but they haven't reported to the credit agencies since 2011. So I'm going to dispute through the credit agencies and see if I can have those deleted for inaccurate info. Worst case, they are hopefully reported accurately finally.

 

Hope some of this info helps someone in the future. I'll update again when I'm done with the CR dispute. Wish me luck!

 

Beginning Scores 9/13: EX 651, TU 639 Short term goals: Scores in the mid 700s 1/15 TU08 701
CapOne Quicksilver $4000 | Sallie Mae World Mastercard $4400 | Barclaycard Rewards Mastercard $2500 | Amex Everyday $6000 | Discover It $2500 | Walmart Mastercard $6000 | BofA Cash Rewards $1200 | CareCredit $700 |
Gardening as of 1-14-15
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