My cosigner declared bankruptcy, AES discharged my loan to NCO, what do I do/what should I expect?

[westy81585]

Uodate: sorry for the late update, I forgot I had done this. Anyways!.... My loan first went to a company called NCO. Some background research showed they house a lot of defaulted debt nationwide, but mostly in the line of credit card debt and the like. Though they were VERY difficult to get ahold of (the dept. I needed had very limited hours), they were reasonable to talk/work with and allowed me to mail in monthly payments (though they stressed they could not ask for them). They also walked me through the likely process as best they could, as they only hold the debt til the bankruptcy case is over.

Once my mother was finally discharged from bankruptcy, a month or two later I received a letter from an actual law firm that specializes in collections. Weldman and something, I forget and don't have it in front of me. They have a slue of payment options and by in large were understanding of my situation of having been a fully responsible paying customer.

Now the downside: if I couldn't pay off a settlement amount ( roughly 70% of the total) within a month (though they were negotiable on that timeline).. it would show up on my credit report until paid off via a payment plan I would set up with them and revisit every 6 months. Never mind the irony that I was willing to pay the FULL amount via the original payment plan!

Thankfully I was able to get a great loan from my credit union for a little over half the settlement, and I put the rest on my credit card (8 % interest, not a good idea for a higher interest card). The interest rates are higher but with the amount of the total shaved off in the settlement I'm actually coming out ahead on the whole thing! My monthly combined payments though are roughly twice as much, so that's a consideration. .. though it also saves me total interest paid cuz I'll be paid off sooner.

Thus far nothing has showed up negative on my credit, but I plan on checking it again in a month or two to be sure (nearing 6 months since settling).

I'll try to remember to update again.

[Anonymous]

Same thing happened to me, I found out 6 months after they declared bankruptcy and AES/NCT "wrote off" my loan entirely. So my loan showed full on-time payment and then poof 100% delinquent and written off. 

I ended up settling with a collection agency (National Enterprise Systems) for 60% of the balance paid in 6 payments (one per month) thinking this would help my credit report but so far it has not done anything to remove the default of the original loan. I do assume that this prevented any further damage as a result of collections, however. 

So now I'm trying to dispute the original defaulted item using documentation about the cosignor bankruptcy and the settlement. As of now it has not been removed and remains the only derogatory item on my credit report. It is very bad though - a default of any kind is quite bad. 

[zerofire]

Cosigner bankruptcy is what is called a technical default. You are not really responsable for it yourself but you will feel the side effects. It is similar to the old agreements that allowed all of your credit cards to switch to penalty APR if one of your loans was not paid as agreed. If you know your cosigner will enter bankruptcy then do whatever you can to remove the cosigner from your loans. Diffrent lenders treat it diffrently but AES seams to be doing the worst case scenario. Also if you get a forberence it will still add intrest to the amount due since it is not a deferment. If you look closely the intrest rate on those accounts will be reasonable and fixed like Sallie Mae/Navient. If your cosigner did not notify you that they are about to declare then they should never have been a cosigner.

[Anonymous]

Update, there appears to be no way to remove this charge off besides the regular 7 year "fall off". I'm attempting to reach out the the company I settled with to see if they can provide additional documentation but the stuff they already provided still won't remove it (it didn't even update it to show it as settled). 

In response to this: "If your cosigner did not notify you that they are about to declare then they should never have been a cosigner." 

No **bleep** lol, but the lesson learned for the audience is that having a cosignor adds risk to you as the primary borrower as well as to the cosignor.

[Anonymous]

5-10 years ago NCO was taken to court with regards to their debt collections practices.  They lost the case. Review some of those practices and familiarize yourself.  They were harassing the lendees, threatening, intimidating and raising the balance without any explanation.  Once you are familiarized with their practices you can steamroll them at their own game. You have THE RIGHT to request documentation on your outstanding debt.  As you will see reviewing the information below they have been having issues with the USFTC and the FCRA. If you cannot get a response from NCO file with the USFTC and FCRA a complaint. Always document (which sounds like you have been doing). I worked for their parent company  EGS - Expert Global Solutions. NCO and APAC Customer Services were subsidiaries. APAC and EGS were bought out by Alorica.  Google the NCO Group that gives you a start into their practices. "In 2004, NCO was fined by the United States Federal Trade Commission for violations of the Fair Credit Reporting Act for improper reporting of consumer's debt information.[4] "

[westy81585]

Just got an e-mail update someone had posted on this so I thought I would come back with one final update: 

It's been 3ish years since this all went down.  I paid off the credit card debt I incurred to help pay this off quite a while ago, and finished off the CU-Loan over last summer.

The write-off that I was dealt as a result of this DID find it's way onto my credit report; where it is now the only bad mark in an otherwise stellar credit history.  To give anyone trying to use this as a reference to what they can expect heres some stuff from my FICO;

I have a 23 account history (14 installment loans, 9 revolving credit), my oldest account is 13.5 years old and my youngest is around a year (that account is actually older, it's my wifes credit card which we added me too recently), I am using 0% of my revolving credit (this sometimes ticks up to ~5% but rarely for more than a month), I have no credit inquiries in the last year and no missed payments for the entirety of my credit), and my outstanding debt is in the 50k range (with minimum monthly payments in the ~$550/month range).  

With all of that in mind, my credit score sits in the 730-745 range.  

Best of luck to anyone unfortunate enough to fall into this same mess I did.  

[jim44]

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@westy81585wrote:

Just got an e-mail update someone had posted on this so I thought I would come back with one final update: 

It's been 3ish years since this all went down.  I paid off the credit card debt I incurred to help pay this off quite a while ago, and finished off the CU-Loan over last summer.

The write-off that I was dealt as a result of this DID find it's way onto my credit report; where it is now the only bad mark in an otherwise stellar credit history.  To give anyone trying to use this as a reference to what they can expect heres some stuff from my FICO;

I have a 23 account history (14 installment loans, 9 revolving credit), my oldest account is 13.5 years old and my youngest is around a year (that account is actually older, it's my wifes credit card which we added me too recently), I am using 0% of my revolving credit (this sometimes ticks up to ~5% but rarely for more than a month), I have no credit inquiries in the last year and no missed payments for the entirety of my credit), and my outstanding debt is in the 50k range (with minimum monthly payments in the ~$550/month range).  

With all of that in mind, my credit score sits in the 730-745 range.  

Best of luck to anyone out of her BK.  I'm no lawyer though and I do have a different story on my CH7.

Sounds like your mother's BK lawyer gave her bad advice from the start or maybe mine did.  I'm no lawyer either however it seems AES would have kept your SLs current until your mother was discharged if you were current up until that time.  Did she ever back out or did she go all the way through her BK?   I was discharged CH7 in 2010.  Now that I think of it I don't believe my BK lawyer ever put my nephew's SL (which I'm STILL a co-signer on) on my list of creditors as he stated the SL was not legally dischargable in BK.  I log on to his AES account all the time as he is constantly late on payments.  There has never been a mention of my BK.  His SL still shows current on my CH with all three bureaus. 

To Creditwizard11:  I know it's been a while since you've posted on this thread but I wanted to say that you were spot on with your advice. I've successfully brought my CS to the mid 700s 8 years after my CH7  through hard work and I'm in constant worry that my nephew is going to default on his loan.  He has been paying ( along with his mother and myself) on his loan for 8 years and he has only paid his principal down $2k because of added interest from forebearance and late payments.  I will be nearly 70 when this loan is paid off.... well into retirement.  I've tried to be released from this loan to no avail as only the principal borrower can release the co-signer and only with so many years no late payments.  It will be another 2 years before he can apply again.  So yes CW11 NEVER NEVER co-sign on any loan even for a family member.  Even good intentions can have bad consequences. 

[RobertEG]

The CRA credit reporting manual, titled the Credit Reporting Resource Guide, expressly addresses the issue of how a joint account should be reported when one borrower filed a chapter 13 and the other borrower did not.

It states that it is their policy that when a Bankruptcy Chapter 13 is filed by one borrower and there is also a non-filer associated to the account, both are protected by an automatic stay.  The non-filer is protected through the completion of the plan.   

Therefore, it is CRA policy that the non-filer should be terminated from the account until the plan is completed.