Education Loan in Collection - Bankruptcy Options

**ae262** · 05-01-2012, 07:45 PM

My question involves bankruptcy in the state of: TN

Hi,

I am really stressed about some loans going in collection and considering bankruptcy. All these loans are educational loans - I do not have any other debt (or many assets for that matter). Here is a brief description of the situation: I have 8 negative accounts on my credit history. 3 of these are related to one of my individual student loan (all three related to one loan), which I consolidated and paid in 2010. These should come off my credit history in the next few years.

The other 5 negative accounts are also student loan on which my name was used as co-signor (4 times with my brother and 1 time with his ex-gf). (The long story is that this was the case of identity theft in a different state (OH where I lived earlier), but the lender has rejected my complaints and closed the case. The police has also done some investigation and closed the case). 4 of these are showing up as "Charged Off" (and 'in collection') on my credit report.

After finishing graduate school in 2007, and working for 2 years - finally paying my one individual educational loan in full in 2010. I quit work in 2011 and started my own business in which I am not making any money.

I would like to get guidance on what are my options regarding bankruptcy and clearing my credit score (even if it takes a few years). I am considering the undue hardship clause of bankruptcy for student loans. I have made all the effort to pay off my debts (and paid my individual loan in full in Dec 2010), and the current debts due to educational loans - I didn't receive any benefit for that education as I was the cosigner. I have had a loss in my business in 2011 and currently completely dependent upon my husband's income. I have a 1 year old child and elderly parents to take care off and currently, we are relying on my husband's income for support.

In my research, I have found out:
Bankruptcy Code says (in 11 USC 523): "(a) A discharge ... does not discharge an individual debtor from any debt- (8) for an educational benefit overpayment or loan made, insured or guaranteed by a governmental unit, or made under any program funded in whole or in part by a governmental unit or nonprofit institution, or for an obligation to repay funds received as an educational benefit, scholarship or stipend, unless excepting such debt from discharge under this paragraph will impose an undue hardship on the debtor and the debtor's dependents;"

Are there options other than bankruptcy? I do not foresee my business turning around in the next few years for me to be able to pay off these loans (the sum of the 5 open loans is >$150K). My brother and I do not speak with each and he is clearly not interested in paying these off or care for his or mine credit history. I want a fresh restart without having to worry about these loans and collectors coming after me.

Thanks for reading this. I will really appreciate any advice,
Anne

**Mr. Knowitall** · 05-03-2012, 09:55 AM

Bankruptcy won't clear your credit score. At least for a few years while you work to rebuild your credit, and probably longer if you don't make a consistent, diligent effort, the impact is more along the lines of kicking it in the teeth and stomping on its grave.

You've given us no information on the loans beyond generally indicating that they're student / educational loans. Odds are they're non-dischargeable, meaning that you might be able to restructure part (or even all, if you can afford it) of the repayment over a 60 month Chapter 13 plan, its unlikely that they'll be discharged even in part. The hardship exception is very difficult to satisfy. If you want an analysis of that issue, you should discuss your case in detail with a bankruptcy lawyer.

**df04527** · 05-03-2012, 10:13 AM

Student loans are almost always non-dischargable in BK unless you can prove, in your LIFETIME, you wll not be able to pay. Best advice is to seek out BK lawyers in your area, most have free consults.

**ae262** · 05-08-2012, 02:20 PM

Thanks! All the 5 loans are from Sallie Mae. I signed as co-signor on the first loan and my brother fradulently used my information (SSN etc.) on other loan applications.

I am willing to settle for a payment plan for the first loan that I signed but for others I would like to go to court and fight that it was a case of identity theft. (I guess I should post this on educational loans forum).

Since, Sallie Mae has already rejected my identifity theft application twice, what are my options?

Who can I sue - my brother? (who clearly had fraud in his mind as it appears that the loan applications were for school that he may have never attended) - Sallie Mae? - they didn't do a proper investigation even when there is a lot of evidence of identity theft and fradulent application?

What type of lawyer should I get and how much it may cost me to go to court?

Also, I live in TN now and the identity theft happened in Ohio. It is not possible for me to go to Ohio on a regular basis - do I need to file this case in Ohio?

Thanks.
Anne

I want to clear my name from these loans and that is why I was considering bankruptcy option. I was hoping to build my credit history in the next 7 years or so.

I have never been late on any of my (own) payments and can't imagine paying back ~$150K in loan/collection, especially when I didn't sign for 4 of the 5 loans.

This is really stressful.

Thanks,
Anne