Collection of a Student Loan That Was Discharged in Bankruptcy
My question involves collection proceedings in the State of: Delaware
I took out 2 Teri Student Loans one 10/2002 & the other 8/2003. Both were for $15k. I graduated 5/2003 and attempted to go back to school in the summer to pursue a second BS degree after graduation (thus the 2nd loan) but working long hours forced me to drop the classes.
Both loans were over and above what the FASFA allows and these were used for living expenses, as my tuition was paid for with Fed Student Loans which I am currently paying off and they have never been late etc.
Citizens Bank was the lender, AES serviced the loans and TERI guaranteed the loans. I'm attempting to find out if the loans were certified by my school, it's possibly they were requested as a 'continuing ed' student.
In Oct 2005, I filed for bankruptcy, prior to the law changing due to job loss and serious medical issues. I did not file an adversary proceeding, because I was not told I needed one. I had one other private loan from Key Bank (which was not nonprofit). All debts including the Teri & KeyBank Loans were discharged in bankruptcy. I have never heard from KeyBank after the Chapter 7 filing.
Over the years, I have heard from numerous collections agencies and law firms. Recently, I sent out a cease and desist letter to an attorney attempting to collect on the debt. I then found out they were attempting to serve me papers, I assume to get a judgment in court. They have not served papers as of today, due to my working long hours and not being home when they attempt (my 14 yr old son is usually home alone and he does not answer the door).
Immediately, I sent the law firm a debt validation request stating I had received yet another letter from them (I did not) and was therefore revoking my cease and desist letter while they provided debt validation. They sent the original collection notices via regular mail and cannot prove I received both notices (one for each loan) at the same time. We do have mail consistently lost and delayed in getting to us. Therefore my DV letter went out about 3 ˝ weeks after the 30 day period really ended – but again they cannot prove this.
I immediately received the following:
1. 2 one page promissory notes - one with the wrong school and the wrong amount listed.
2. An affidavit from a Teri Collections Director stating I owed this debt - although the amounts had no accounting and were several thousand dollars above the promissory note amounts with interest on top of those amounts.
3. A memo from AES assigning the rights of the debt to Teri. No dollars amounts listed just the account number and the current owner listed as Citizens.
My Second DV Letter requested a proper validation showing this law firm has the right to collect and a proper accounting since I never attended one of the schools on the promissory note. Also that the amounts from promissory notes and affidavit do not match and there’s no explanation. I have not heard from them again, but they are still attempting to serve the summons. (All letters sent via certified mail/return receipt)
My questions are:
1. Since these loans were successfully discharged in the bankruptcy (shouldn't I have gotten notice if something wasn’t discharged)? Can this be a defense for me if I have to go to court?
2. Do they have to give proper validation of debt AFTER they file to sue? Since they have not served me yet do they have to cease filing suit/attempting service until they give proper validation of debt?
3. Is an affidavit from a supposed Terri Collections Director written 5/2010 (his signature is not legible) a proper validation of debt or do they need to show why there’s such a disparity between figures on promissory notes & his figures in the affidavit.
4. Do they have to prove they are legally assigned or own the debt? The firm is Mattleman, Weinroth & Miller in New Jersey (with other state offices).
5. Does the fact that this student loan debt was used for living expenses and not tuition help give me a defense in discharging the debt. I’ve read about the nonprofit exclusion.
6. Are they allowed to sue me while they themselves are in Bankruptcy? This seems unfair.
7. I recently received an accounting from AES. These loans went into forbearance over a year after I took them out and defaulted after the bankruptcy forbearance period. There is a year they show no activity. I never made a payment to them. Shouldn’t the SOL started 6 months after the semester was over and I ceased going to school (even though for the second loan I dropped classes almost immediately) or I graduated?
8. I make $60k per year, but I’m a single parent who is currently going thru a divorce and live paycheck to paycheck. My husband was ill and out of work for the 2 years prior to divorce so we have no money. Prior to that I was ill and lost my job. I live within the IRS collection guidelines for housing, food, auto costs and still have nothing left over. My only expense outside those standards is that of $250 for my Fed Student Loans. Is there any chance of a hardship discharge defense with my income? Can they attempt to take my child support of $800 per month? Note that even with my income and child support I still live paycheck to paycheck – I have living expenses only and Fed Student Loans for monthly bills. I was in hardship forbearance until last year due to job loss and then husband's illness.
I’m sorry to ask so many questions. I just need some guidance as I cannot afford an attorney.
Thank you.
Re: Teri Private Student Loan Attempting to Serve Summons/Previous Bankruptcy Filed
If you believe the debts were discharged in bankruptcy, document the discharge to the creditor and if they continue to try to collect petition the bankruptcy court to hold them in contempt. I can't investigate your bankruptcy or the associated records, so I can't verify your belief that you obtained a discharge.
If you don't want a collection agency to contact you, instruct them to stop. They may still sue you after being instructed not to contact you.
Re: Teri Private Student Loan Attempting to Serve Summons/Previous Bankruptcy Filed
Thank you for your reply.
So even though no advesary proceeding was done, as long as the bankruptcy paperwork shows ALL debts were indeed discharged, they are unable to argue the nonprofit defense as I'm assuming TERI is contending. I did speak with someone about a year ago and they stated since there was no advesary proceeding, the bankruptcy discharge does not matter.
Again this bankruptcy was filed prior to the Oct 2005 law changes.
Any case law that I could include in my letter to then law firm? Or is the bankruptcy discharge paperwork enough?
Again thank you.
Re: Teri Private Student Loan Attempting to Serve Summons/Previous Bankruptcy Filed
Does the fact that this student loan debt was used for living expenses and not tuition help give me a defense in discharging the debt. I’ve read about the nonprofit exclusion.
No it doesn't. Living expenses are considered part of the "cost of attendance" of going to school, and student loans that go towards the "cost of attendance" are non-dischargeable.
As for the non-profit exclusion, most people believe that all student loans were dischargeable prior to 2005. That's not correct. In 1998, federal loans were made non-dischargeable AND private non-profit loans were made non-dischargeable. TERI is going to claim that they're a non-profit, and that their loans were thus non-dischargeable when you filed.
One possible argument that you may have in your arsenal is a statute of limitations argument. Certain private loans are still subject to the statute of limitations of your state, but you would have to talk to your attorney to find out whether your loans qualify (it gets really complicated trying to figure out which student loans qualify and this even stumps a lot of attorneys). I would encourage you to look into these SOL issues, as it sounds like it's been several years since any activity has taken place on these loans. If these loans are subject to your state's SOL and if the SOL has run then you can move to dismiss the lawsuit as time-barred. You should really talk to an attorney in your area who has dealt with these types of loans.
Re: Teri Private Student Loan Attempting to Serve Summons/Previous Bankruptcy Filed
Thank you for attempting to help.
I spoke to the bankruptcy firm that handled the bankruptcy back in 2005 and to be quite honest they were of no help. She basically said call them and try to work out a deal, that TERI never had to answer the bankruptcy petition because they were exempt since they were nonprofit.
This law firm is attempting to serve me paperwork and has not answered my second DV letter, so that's out. Plus one of the prom notes is completely wrong - I think it was a denied loan request and I don't know how to prove it unless I admit to having taken out a loan for less money. The school listed I never attended and the amount is way more than I took out. Will they have to show any other proof in court?
I've tried to research the SOL - here's my issue - Delaware has a 6 year SOL - I received information from AES who serviced the loans that these loans had no activity or payments until 2005. Remember I graduated in May 2003. The promissory note states Rhode Island state law which is also a 6 yr SOL. BUT then AES claims there is a one year Adminstrative Forbearance on the loan beginning in June 2005 and then the bankruptcy forbearance and then the loans defaulted in June 2007. This cannot be right - why would these loans just sit around until 2005? I NEVER made a payment.
Do you have any suggestions on how I can use this SOL in court? I do not have the money for an attorney and will be doing this Pro Se. I have not yet been served due to the hours I work - I'm just never home but I'm sure I will be at some point in the near future.
Also when I get to court will I have any options for payment if they can prove I owe the debt? I'm told they can just show the affidavit from a "collections director" stating I owe the money and the one page promissory notes (at least one of which is false) and I'm going to have my wages garnished. I live paycheck to paycheck and am almost within the IRS collections guidelines of living - I have $350 extra per month and $240 of that goes towards my student loans.
Also don't they have to prove they are assigned the debt? They only sent a basic one page paper from AES assigning the rights of the loan to TERI in March 2007...yet the loans weren't paid off according to AES until June 2007. The law firm stated in a letter that TERI is their client and I need to direct all future correspondence to their law firm.
Again thanks for any direction.
Re: Teri Private Student Loan Attempting to Serve Summons/Previous Bankruptcy Filed
If I could answer all of your questions, I would. What you really need is an attorney in your area who can look at the facts of YOUR case and determine how things will shake out. Maybe you could stop by your local legal aid and get some law student to do it for free.
As far as the SOL issue goes, it sounds like the court will have to decide just exactly when the clock started running. What you would do is move to dismiss the case based on the action being time barred once you are sued. This is really an area where you need a lawyer who has experience doing this stuff. Or at least a law student willing to help for free or for a discounted price.