Which State's Statute of Limitations Applies to Student Loan Debt
My question involves collection proceedings in the State of: Maryland, New York, or Rhode Island
My parents who currently reside in MD are legally responsible for a large, defaulted private loan that was originally in my ex-wife's name many years ago when we lived in Rhode Island. In the early 2000's, when we were married, we borrowed quite a bit of money when she was in school and I was temporarily unemployed. My parents cosigned since my credit had deteriorated. When we divorced, we mutually agreed that I would take responsibility for the majority of loans, so I contacted the loan servicer and requested that my ex-wife's name be removed from most of the loans, thus leaving my parents as the primary responsible party. Various loans were then consolidated into one single loan of over $100,000.
Over the years, I made hefty payments until around 4-5 years ago when my job situation became unstable and I decided to relocate to NY State. We had fallen so far behind, the loan eventually went into default 3 years ago. Per permission from my parents, I was their representative and handled all communications with the loan servicer as we tried to make payment arrangements before the loan officially defaulted. Since the default 3 years ago, interestingly enough, no one has contacted us regarding this loan either by phone or mail. I was waiting for a collections agency to contact me so I could try to work out an arrangement.
But as one year went by then another, I was told by an attorney friend of mine (who is not a debt attorney), that we might as well wait to see if the Statutes of Limitations would come into play, and then at least we couldn't be sued. Of course the debt still remains, but interestingly enough, it hasn't affected my parents' credit yet. It shows up on my mother's credit report as a "charge-off, sent for collections" with $0 value shown. I have several questions that I hope that you might be able to help answer. Here are my questions:
1) Which state's SOL would apply in this situation? My parents moved to MD around 6 years ago from RI, so the loan defaulted while they lived in MD. I have read conflicting statements about which state's statutes applies. Some people say that the state's statutes in which the responsible party currently resides would apply - if so, isn't MD's SOL 3 years? I've also read that the SOL in the state where the loan contract was made would apply, in this case RI where the SOL is 10 years. Also, maybe worth mentioning as I stated above, I became their representative and all correspondences were to me in NY State. The loan servicer also used my NY address as the official address on file.
2) Why hasn't anyone contacted us? Since I was the point of contact (all contact info including address and phone numbers for the loan was my NY home), I expected that I would be contacted first. If the collection agency looked into my parents' credit reports, it shows that they currently reside in MD but no one has contacted them either.
3) Why aren't my parents' credit affected by this default? As I stated above, it is listed as a charge-off and $0. Their credit scores are good.
Thanks in advance.
Re: Which State's Statute of Limitations Applies to Student Loan Debt
With the loans having been consolidated into a single, new loan, the original loans are no longer an issue. If the consolidation loan was federally subsidized, then you should expect that no state's statute of limitations will apply to collection.
We would have no way of telling you why the lender has not contacted you.
A charge-off on your credit report does affect your credit score.
Re: Which State's Statute of Limitations Applies to Student Loan Debt
Thanks for responding. The same private loan company from where we received different loans did the consolidation about 8 years ago, so it is still a private loan. That being the case, I'm still trying to figure out which state's SOL might apply. Any insight would be appreciated. I'm also looking for an attorney to dig deeper into our situation, but I haven't had any luck thus far.
Re: Which State's Statute of Limitations Applies to Student Loan Debt
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jaeshik
Thanks for responding. The same private loan company from where we received different loans did the consolidation about 8 years ago, so it is still a private loan. That being the case, I'm still trying to figure out which state's SOL might apply. Any insight would be appreciated.
Something isn't clear here. You wrote.
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when we were married, we borrowed quite a bit of money when she was in school
"We" indicates that you were both "borrowers" or was it just your wife who was the "borrower."
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My parents cosigned since my credit had deteriorated. When we divorced, we mutually agreed that I would take responsibility for the majority of loans, so I contacted the loan servicer and requested that my ex-wife's name be removed from most of the loans, thus leaving my parents as the primary responsible party. Various loans were then consolidated into one single loan of over $100,000.
And you have documents that show that your parents are the only "borrowers" on the consolidated loan?
If your parents are the only "borrowers" on the consolidated loan then they would be sued in MD and the MD SOL is 3 years unless the loan contract has a "choice of law" provision and then you run into some complicated issues that would have to be addressed when they did get sued. No sense going into it here until that happens.
However, if you are the "borrower" and they only con-signers, you would be sued in NY where the SOL is 6 years and they would be co-defendants but the issue of the MD SOL could still be raised in their defense.
Like I said, it gets complicated and the SOL doesn't prevent a lawsuit because the SOL has to be raised as a defense. Given the possibility of co-defendants in different states, you're each looking at spending a barrel full of money on separate defense attorneys if you both get sued.
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jaeshik
I'm also looking for an attorney to dig deeper into our situation, but I haven't had any luck thus far.
I wish I had a buck for every time I read that.
The way you find an attorney is you make an appointment, go to his office, tell him what you need, and write him a nice big retainer check.
If you expect that to work differently, you aren't going to find one.
Re: Which State's Statute of Limitations Applies to Student Loan Debt
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adjusterjack
If your parents are the only "borrowers" on the consolidated loan then they would be sued in MD and the MD SOL is 3 years unless the loan contract has a "choice of law" provision and then you run into some complicated issues that would have to be addressed when they did get sued. No sense going into it here until that happens.
If the loan was made by the federal government directly or was guaranteed by the federal government (the feds no longer guarantee loans but it did up until 2010) then there is no statute of limitation on the debt and it won’t matter in what state the debtors reside. That’s what Mr. Knowitall was getting at earlier.
If it is a private loan, then the state SOL will matter. The law of the state in which you are sued provides the applicable statute of limitations, but the answer as to what that limitation is is not always simple as there may be conflict of law issues to consider.
Re: Which State's Statute of Limitations Applies to Student Loan Debt
Thank you. My parents are now officially the only signor/co-signor for the loan. With their permission, I was their point of contact when dealing with the loan servicer. So the loan servicer made my address in NY as the official address on file, with my parents' names listed as the account holders. I understand it can be complicated, but I'm just trying to get a better grasp of potential implications.
Re: Which State's Statute of Limitations Applies to Student Loan Debt
I'll address the elephant in the room.
Why isn't the loan being paid?
Re: Which State's Statute of Limitations Applies to Student Loan Debt
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but interestingly enough, it hasn't affected my parents' credit yet. It shows up on my mother's credit report as a "charge-off, sent for collections" with $0 value shown.
are you sure it isn't affecting her credit? My bank will not loan money to a person with a charged off and unpaid debt no matter what your credit score is.
Re: Which State's Statute of Limitations Applies to Student Loan Debt
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Dogmatique
I'll address the elephant in the room.
Why isn't the loan being paid?
By the time I had settled down with permanent employment, we were already months behind, having exhausted all deferment options. Soon thereafter, the loan went into default. I was willing to cooperate with the collections agency that our account was transferred to, but as I mentioned in my initial post, I've been waiting for over 3 years and we have not received one phone call or letter from anyone regarding the loan. The issue of SOL became an issue as more time has passed. Since my parents have been living in MD for the last 6 years, I wanted to get more info as to whether the MD SOL (3 years) would apply in our situation. I fully understand that the SOL does not wipe the debt, but knowing that they cannot be legally sued would be helpful.
Re: Which State's Statute of Limitations Applies to Student Loan Debt
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jaeshik
By the time I had settled down with permanent employment, we were already months behind, having exhausted all deferment options. Soon thereafter, the loan went into default. I was willing to cooperate with the collections agency that our account was transferred to, but as I mentioned in my initial post, I've been waiting for over 3 years and we have not received one phone call or letter from anyone regarding the loan. The issue of SOL became an issue as more time has passed. Since my parents have been living in MD for the last 6 years, I wanted to get more info as to whether the MD SOL (3 years) would apply in our situation. I fully understand that the SOL does not wipe the debt, but knowing that they cannot be legally sued would be helpful.
As you were already told, they still can be sued. They would have to raise the issue of the SOL as their defense.