HELP with Collection Agency

[Nolan34]

So my fiance fell behind on her student loans and now they're in the hand of a collection agency, Rubin & Rothman. The letters she received are the standard dunning notices that require her to contact the firm within 5 business days. I tried to speak on her behalf but they want her to call to ok it first.

So this is something new for me but want to help her as best as I can...so i come to the place with the all the answers.

My first question is...

#1) what is the best course of action when working with student loans in collections?

#2) can she rehab the loans so they can then be current?

#3) she will be filing bankruptcy soon but I take it the loans can't be discharged in BK?

#4) what is the repercussions if the loans stay in collections.

I hope to get help from here for her. I haven't spoken to the woman yet from the CA.

[Nolan34]

Anyone?

[SCF]

What type of loans are these?  Federal student loans are very different from private student loans in this situation.  While it's not impossible to discharge student loans in bankruptcy, it is very difficult because borrowers have to clear a much higher standard of showing that making the payments would be basically impossible and constitute a substantial hardship.

[Nolan34]

SCF - They are private loans not government ones. The CA offered a settlement that was stil way out of her reach. She is supposed to meet with a BK attorney this week to discuss her options

[RonM21]

If the settlement is way too far off, maybe see what the BK attorney says? Are these collections reporting yet?

[SCF]

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@Nolan34 wrote:

SCF - They are private loans not government ones. The CA offered a settlement that was stil way out of her reach. She is supposed to meet with a BK attorney this week to discuss her options

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OK, with private loans you can handle them much the same way you would other unsecured debt in collections.  They are subject to the relevant statute of limitations, really the only difference to consider is the higher bar for including them in bankruptcy (which your BK lawyer will be able to help you with in more detail).  Rehab isn't an option for private loans, so you're basically down to settling the debt, waiting out the SoL and hoping that they don't sue and secure a judgment in the meantime, or trying the BK option.

[Nolan34]

Thanks SCF!! Now my next question is that her father co-signed on the loans when she was just getting into college. If she files for BK, what happens when a co-signer is involved?

[SCF]

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@Nolan34 wrote:
Thanks SCF!! Now my next question is that her father co-signed on the loans when she was just getting into college. If she files for BK, what happens when a co-signer is involved?

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I wouldn't be surprised to see them try to lay the debt at the co-signer's feet.  Unless that's specifically prohibited in bankruptcy cases it is why they required a co-signer in the first place, to have someone who would pay if the primary borrower couldn't or wouldn't.

[Anonymous]

if you're going to consult with a lawyer, make sure s/he specializes in student loan, because student loan is bit different than other debts when it comes to filing bankruptcy, you want to make sure that the lawyer knows what they're talking about.

try to find out statue of limitation on debt in your state, because it kicks in the moment payment was missed, but it could be reset if your fiance make any payments or acknowledge the debt and make a promise to make payment to collection agency.

filing bankruptcy won't discharge the student loan debt, but if your fiance files chapter 13, she only has to make small monthly payment for 5 years and keep CA off your back. Actually I think if your fiance could prove that paying back student loan would cause hardship, but I hear it's really hard to prove.

if your fiance's dad co-signed the loan, unless he's going to pay back the loan, he's basically screwed, and expect his credit score to take huge dive, and I think they go after co-signers more aggressively than original borrower.

remember to save all the letters + envelopes from collection agency, if they leave any voice mail, do not delete them, and try to record any conversation you have with the collection agency.

[Nolan34]

We met with the bankruptcy attorney Thursday evening and after going over my fiance's credit report, he advised against a BK because of the co-signer. He offered to help us with a letter to the CA saying he is representing her and would like to get a settlement. He said he can get a better settlement tan the one offered. He said the private loans can be discharged but it would then fall on her father's shoulder and of course we wouldnt want to do that to him. 

I like his offer with helping her out but she would like a clean slate because she has quite a few collections on her CR from when she lost her job (living on her own).