Statute of Limitations Rights Regarding My Student Loans (Sallie Mae)

[thebrokebroker]

My question involves collection proceedings in the State of: NEW JERSEY

Hello,

After two years of finishing grad school and over $140,000 of student loan debt, I have decided I have to file Chapter 7 bankruptcy for my own health and sanity. I've been barely making ends meet and hardly providing for my family because of this student loan and credit card debt (another $25,000). Thought I would have a nice job with a Masters in hand. So much for chasing the American dream, right?

Since I can't include my student loans in bankruptcy, after I file my Chapter 7, I planned on defaulting on my private student loans ($47,000) and letting the 6 years statute of limitations run out. I figure it'd be 6 years until I would qualify to purchase a home for my family. The money I will be saving in credit card and private student loan payments I can save. Private loan payments are $530 a month. Credit card minimum payments equal $625 a month. My family lives with my mother due to our financial hardship. Thanks to the protections of the federal gov't loans I am in the IBR plan and have a payment of $0 because of my income and family size.

I have a few questions regarding the SOL in NJ and private student loans:

1. If Sallie Mae sues me and gets a judgment against me for the $47,000, does that judgment last forever, with liens on any of my accounts (or new accounts)?

2. If they do have a judgment/lien, will the judgment fall off my credit report in 7 years?

3. Is a SOL just for collection purposes (legally collecting a debt) or is the SOL good for judgments too? For example, after 6 years will I owe them nothing? Or after 6 years I may legally not owe them anything but with a judgment on my credit report I will not be able to get credit, if they renew the judgment.

If I had a career in what I went to college for I'd be happy to pay back what I borrowed. I just made a bad choice and took out the wrong loans.

Thank you for your help.

[Mr. Knowitall]

A New Jersey judgment is valid for twenty years after entry (the date the court formally enters the judgment it issues to resolve litigation) and can be renewed once, for a potential total of 40 years.

[flyingron]

Darn auto spell corrector... that should say "often can be renewed".

[KeithDoxen]

You would basically be gambling that once you default, the lender will go six years without suing you. This is possible, but it's also possible that they will sue before the SOL is up. Six years is a long time. If they sue during that period and get a judgment, that will be good for 20 years and then they can put a lien on any house you buy. It might be better for you to try to negotiate a settlement with them.

In order for this to work for you the way you plan, you'd have to default, AND the lender would have to wait six years before they sue you, AND you'd then have to be prepared to move to dismiss any lawsuits against you based on the defense that the SOL has expired, which means paying a lawyer to do that for you. Oh, and then you'd have to wait until the 7th year or so for the line to fall off your credit report. Those are a lot of "ifs." All the lender has to do is sue you before the six years or up and your plan is basically over. If the SOL were three years I'd say go for it but because it's so long I'd say convince them you're broke and try to cut a deal on the loan.

[flyingron]

Judgments last a long time (ten years is typical) and often can be removed. Liens last until they are satisfied. Neither of these have a "statute of limitations".