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  1. #1
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    Jun 2011
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    Default Chapter 13 for a Sallie Mae Loan Co-Signer

    My question involves bankruptcy in the state of: NJ

    I have loans from Sallie Mae in a large amount, both federal and private. My parents co-signed these loans and I was making payments in a timely fashion. Due to issues, my parents recently filed for a Chapter 13. I knew about this, but the fact that they co-signed for my loans escaped our minds. Now, Sallie Mae is aware of this and has put a hold on most of my loans as they are in bankruptcy status - I am only able to repay a few. Since I am the primary account holder with Sallie Mae and since I am NOT filing for bankruptcy, how does this affect my credit rating and/or how does this have a detrimental effect on me? Speaking to Sallie Mae, they suggest that I try to release the co-signer, but this can only be done after the Chapter 13 has been taken care of. Am I in trouble as far my credit or my future goes? Or will I be okay since I am not the one filing? I am young and don't want the hassles of bad credit to linger with me for the rest of my life.

  2. #2
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    Default Re: Chapter 13 for a Sallie Mae Loan Co-Signer

    I'm not sure what you're trying to tell us by "I am only able to repay a few". Are you stating that you had defaulted on some of your loans before your parents filed for bankruptcy protection? That they were paying some of your loans and will no longer be doing so? That you have cash to pay off some but not all of the loans? Something else?

  3. #3
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    Default Re: Chapter 13 for a Sallie Mae Loan Co-Signer

    Quote Quoting Mr. Knowitall
    View Post
    I'm not sure what you're trying to tell us by "I am only able to repay a few". Are you stating that you had defaulted on some of your loans before your parents filed for bankruptcy protection? That they were paying some of your loans and will no longer be doing so? That you have cash to pay off some but not all of the loans? Something else?
    NO I have not defaulted on any loans or anything. Apparently, Sallie Mae has frozen the loans that have been co-signed - I am only able to repay the ones that are not frozen i.e. only the few that did not need my parents co-signature.

    I have no issue paying off my loans - I was paying my federal loans with an income-based repayment plan, while my private loans were in internship/residency deferment. My concern is since now my co-signer is filing for a bankruptcy, what will happen to my loan status with Sallie Mae? The customer service sallie mae reps do not have an answer and are clueless. I have searched online and there are various answers - some parties say yes my credit will be affected terribly as the loans will default, while others say just continue and nothing will happen. I wanted to get an expert opinion on the matter...

  4. #4
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    Default Re: Chapter 13 for a Sallie Mae Loan Co-Signer

    Some of those answers will relate to Chapter 7 in which there is no co-debtor stay in bankruptcy. You'll see a lot of people suggest refinancing or otherwise removing a cosigner from a debt before the cosigner files for bankruptcy protection in order to prevent possible problems with your own credit and score; it's a bit later for that now, though.

    In the abstract I don't think the cosigner's bankruptcy should affect your credit score, as long as your loan is otherwise current and you bring the account current when the stay is lifted, but in practice I cannot guarantee you that all issues related to the bankruptcy will be accurately reported or that a creditor, looking at your actual report and not the credit score, might find it confusing or be concerned by the fact that your student loans aren't being actively paid or show a period of nonpayment after the stay is lifted.

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