Forged Disbursement Check

[Anonymous]

I have a private student loan through American Education Services (AES), in which my father was the co-signor for the loans. The disbursement check(s) for the loans were addressed to my family's household. My father deposited the checks into his personal business account @ a credit union. It should be noted that my name was not listed on this account, and I was not even a beneficiary of this account [my father was the only party listed for this account]. The problem exists in that I never endorsed the aforementioned disbursement checks, and if these checks did have two signatures, my signature would have been forged by my father. An even bigger problem arises in the reality of my father being deceased (he died during my last week of college). The bottom-line is that way more money than necessary was borrowed to furnish my educational expenses, hinting that my father used a great portion, if not all of the loan money for purposes that did not relate to my college experience. Also, very little money was left in his personal business account (< 1K). With all this said, what are my options? I owe pretty close to $90K in these loans, and I didn't use anything close to that. I am financially unable to pay them, so bankruptcy is a valid option, but...because I never endorsed these checks, am I liable for this money? I think this is a legitimate question. What do I have to do to see if these checks were not truly endorsed by me? If they didn't have two signatures and/or my signature was forged, who is at fault? Obviously, I cannot take action against my father because he is dead (he also did not have an estate), so who or what actions do I seek? Any and all help is appreciated.

[llecs]

See an attorney.

If the money is in the biz account you can get the money back via a probate judge (if not too late) or sue the business.

[LynnInMN]

Student loan checks usually only require one of the parties to sign to cash.  Endorsement is usually listed as "or"

The bottom-line is that way more money than necessary was borrowed to furnish my educational expenses, hinting that my father used a great portion, if not all of the loan money for purposes that did not relate to my college experience.

Also you signed the prom notes...why did you borrow so much? 

Bankruptcy is not a valid option....student loans including private loans are nondischargable in BK.  (There are exceptions but it is extremely difficult to meet the hardship requirement. 

[Anonymous]

This is the origianl poster, I'm under a different username b/c my account has been locked, and it has yet to be unlocked, thus the new username.  I appreciate the feedback, however, I have spoken to a bankruptcy attorney and a credit counselor over the phone, and both parties said that my debts would be cleared.  And, yes, these private student loans are my only debts.  What would be the point of bankruptcy if they are not cleared?  Is there anything to an "undue hardship," as I believe my case certainly presents that.  Also, as for the reason for so much money.  I was under the impression that this was a federal loan, meaning only the money that I used for school would need to be re-payed, and the rest sent back to the government.  Essentially, I was under the impression that I was "approved" for that elaborate amount of money.  Besides that, I trusted my father, which turns out was a mistake.  My father placed it into his account, which I strongly objected, and requested that the money be placed into my account.  I had a part-time job in which I used that earned money to help furnish my educational expenese, and I was extremely frugal w/ my money, so again a small amount of the loan money, if any, went to me.  The contract of the loan, which is the only place where my real signature appears states: "The proceeds of this loan will be used only for my educational expenses at the School.  The Cosigner will not receive any of the loan proceeds."  Again, the cosigner is dead, so I can't go after him or his estate, b/c he didn't have one.  And, back to the hardship, as of right now I have a $1500 monthly surplus.  I am living w/ my grandparents, so no major bills including utilities, auto has been paid off since I was a senior in high school, and have very minimal grocery demands.  They are asking me to pay $798/month.  I am in need of a new vehichle and would like to live on my own.  I would have zero income and would probably be in the hole each month if I pay the minimum on these debts.  That's also pretty close to 10K per year, which is **bleep** near 1/2 my salary after taxes.  If I were to pay them, the loans would be paid off when I'm 57 years old, and I would have invested $286K.  I believe I would qualify for the "undue hardship," but that's just my opinion.  Your thoughts?

[LynnInMN]

Problem you will be fact with in your arguement is can you prove that the cosignor did not give you the money?  And if he did not, why did you continue to allow him to cash the checks?

Did the attorny bring up the Brunner test in establishing dischargablity??  Hate to say it but most attorneys and credit counselling places are clueless to the regs of student loans. '

Student loans are not usually discharged in bankruptcy. It is difficult, but not impossible, to do so if you can show that payment of the debt “will impose an undue hardship on you and your dependents.”

Courts use different tests to evaluate whether a particular borrower has shown an undue hardship. A common test is the Brunner test which requires a showing that 1) the debtor cannot maintain, based on current income and expenses, a “minimal” standard of living for the debtor and the debtor’s dependents if forced to repay the student loans; 2) additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period of the student loans; and 3) the debtor has made good faith efforts to repay the loans. (Brunner v. New York State Higher Educ. Servs. Corp., 831 F. 2d 395 (2d Cir. 1987). Not all courts use this test. Some courts will be more flexible.

UNDUE HARDSHIP EXAMPLES

It is up to the court to decide whether you meet the “undue hardship” standard. Here are a few examples of successful and unsuccessful cases.

 
1. A 58 year old I.R.S. employee making about $38,000/year was able to get his loans discharged. He had taken out the loans to attend a chiropractic program which he never completed. His overall expenses were about equal to his income. He was able to show that it was unlikely that his income would increase until his planned retirement at age 65. He was single with no dependents and had health problems. The court found that he had acted in good faith even though he had never made any voluntary student loan payments.  
2. A college-educated married couple proved undue hardship and were able to discharge their loans. They both worked, but had income barely above poverty level. The court noted that the borrowers worked in worthwhile, although low-paying careers. One worked as a teacher’s aide and the other as a teacher working with emotionally disturbed children. Even with a very frugal budget, they had $400 more a month in expenses than income. Their expenses included $100 monthly tuition to send their daughter to private school. Relatives paid for most of this and the couple testified that they objected to the public school’s corporeal punishment policy. In agreeing to discharge the loans, the court also found that the couple had acted in good faith because they asked about the possibility of a more affordable repayment plan.

   Not all courts are as sympathetic to borrowers who work in low-paying careers. For example, one borrower was denied a discharge because he worked as a cellist for an orchestra and taught music part-time. The court suggested that this borrower could find higher-paying work. Another court came up with the same result for a pastor. The court found that it was the borrower’s choice to work as a pastor for a start-up church rather than try to find a higher paying job. 

     
3. A number of courts have granted discharges in cases where the borrower did not benefit from the education or went to a fraudulent school.
4. There have been mixed results when borrowers have tried to show that their financial difficulties will persist into the future. For example, one court found that a borrower’s alcoholism was not an insurmountable problem, but some borrowers have won these cases. In one case, a borrower’s testimony about her mental impairment, including evidence that she received Social Security benefits, was enough to convince the court of undue hardship. The court agreed with the borrower that her ongoing mental illness was likely to continue to interfere with her ability to work.

Message Edited by LynnInMN on 11-15-2008 02:18 PM

Message Edited by LynnInMN on 11-15-2008 02:18 PM

[Anonymous]

A few things to ponder...

1.)  I called AES and asked them what their policy was on the endorsement of disbursement checks.  Their response was that it would be "impossible" for my father, the cosigner, to take the check and deposit it into a seperate account.  It would need both signatures, and most banks would require both people on the check to be on site for the deposit to go through.  Maybe they are wrong, I don't know, but that is what they told me and I have it on tape.

2.)  Did my father give me money for school?  In a word, yes.  Was it the loan money?  I don't really know for sure.  Like I said, I had a part-time job, which this money was used for school, and also, I was extremely frugal w/ my money.  And as far as allowing him to continue to cash the checks, like I said, I thought I would only pay back what was used, b/c again, I was under the impression it was a federal loan.  Also, why shouldn't I trust the cosigner, he was my father.  Also, I never knew anything about these checks.  He told me it was directly deposited into his account.  And, that's not the case, checks were mailed...AES confirmed that one for me. 

3.)  As for the hardship, I'm not going to breakdown the numbers again, but I'm pretty sure I'd qualify (that's just me using common sense).  If I pay the minimum, I'll be at least $200-300 in the whole every month, once I begin to live on my own and purchase a new car.  I work for the health department, so trust me, I do not make a whole lot of money.  Also, shrinking the monthly payments will do no good.  At the given rate, I'll be 57 years of age when they are paid off.  With that said, $200-300 in the red every month for the next 32 years...I do not call that living reasonable and for sure not comfortable.

Also, once again, I appreciate the feedback.

[LynnInMN]

You have to realize that AES will fight you hard on this. The fact that you are young and have no other bills will not play in your favor.  No dependants either.   Working a job that doesnt pay well doesnt cut it either....you could be working a job that pays better....or a second job.  You might want to do some research on other court cases with AES cause I dont think you have a chance in hell of wining. 

You cannot use the reason you thought these where federal loans....it wont cut it.  You got an FA report every year outlining your aid.....federal and alternative. And the prom notes are very clear that they are not private loans.  And even at the chance that the signtures were forged, they will argue that you signed the prom notes and received educational benefit from it.  Plus you will have to prove that they were in fact forged.  

AES is a division of PHEAA, a huge non profit guarantor.  They will fight you long and hard. 

$200-300 per month????  I suggest you find a student loan calculator.  Even with a 6% interest rate, your interest alone is running close to $500 per month.

[Anonymous]

I do not think you read my post(s) correctly.  I said they are asking me to pay $798 per month on these debts, and I stated that w/ planned expenses (apt, auto, groceries & utils) and paying the minimum on these loans, I'll be at least $200-$300 in the whole every month.  I will have to go at this $798/month until I'm 57 years of age.  I'm nearing retirement at that age.  Sorry, that's not America.  As far as the "courts" telling me to get another job.  Well, they need to find one for me.  I'm working in the public health sector, which I think should be admired and applauded, especially by the legal system.  I make just below the median income for a single person household, and it should be noted that it took me 9 months of job searching to find a job that paid this well w/ my creditentials.  All other jobs that I qualified for were paying at least $6 - 7K lower than what I am making now.  Also, you mentioned an annual FA report outlining my aid...I have no idea what you are talking about.  I never received this.  Also, I'm not sure what the technical definition of a promisery note is, but all I have is a "Loan Request/Credit Agreement - Signature Page."  You stated, "the prom notes are very clear that they are not private loans."  I don't know if that is a typo or what, but again, these are private loans.  I understand AES has both federal and private loans, but I know for a fact (and AES confirmed this) that these are private loans through Chase Bank, who bought out Banc One, the company that the loans originally went through.  Also, this credit agreement form that I have is not clear if it is a private or federal loan, and I'll just say that I take myself to be an educated individual, and I'm telling you...it's not clear.  And again, I cannot stress this enough...I posed to AES the scenario of my father forging my name and/or the check only having one endorsement (the cosigner), and they were adamant about this being forgery.  I have it on tape, and I think that should be worth something.

[Anonymous]

Also...before you reply, take this into consideration.  I decided to get some loan people speak from the PHEAA web site.  All right, this is an alternative loan, which means: "Alternative loans are not part of federal programs like the Federal Family Education Loan Program. Therefore, loan terms and limits vary substantially by program and lender. They are based on creditworthiness and may require a co-signer."  My question now is, does this have any bearing on a bankruptcy case?  How is this different from a person going in debt w/ a credit card company, like for example Chase Bank, which by the way, is the company the loans are through.

[Anonymous]

Also, here is the definition of a promissory note according to Chase Bank:

"A legally binding agreement the borrower signs to obtain a loan under the FFELP, in which the borrower promises to repay the loan, with interest, in periodic monthly installments. The agreement also includes information about any grace period, deferment, or cancellation provisions and the student's rights and responsibilities with respect to the loan."

Note that my alternative loan is not under the FFELP, so which rules (pertaining to bankruptcy) apply?