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  1. #1
    Join Date
    Aug 2011
    Posts
    1

    Default Sallie Mae Default

    In 2009, my wife and I filed for bankruptcy due to an over-extended loss of work. We were unable to pay our bills and filed for Chap. 13. We had $35K of private consildated student loan debt. We were aware that this was required to pay back. We contacted Sallie Mae and informed them of our situation, and they agreed with no sign of problems. Immediately after our Bankruptcy was finalized, we were contacted by Sallie Mae informing us that they were sending us to collections without notice. We attempted to stop this, but they refused. They sent us to a Collections agency "acting on behalf of Sallie Mae". We set up a payment plan with them have been paying them monthly since. I had my credit run for the forst time in over a year and a CHARGE OFF is shown from Sallie Mae...which basically means we are in default. If we are paying them, how we are we in a state of CHARGE OFF? This is where I am confused and need help:
    1) If we are already defaulted, what is the point of paying anyone back? What benefit is there?
    2) I read numerous posts saying DO NOT default on an SM loan...are we screwed for life? Does this ever come off of your credit?
    3) What are the alternatives in this case?

    Bankruptcy is supposed to allow a fresh start, but because of this, we seem to be tainted for a long time. Will we ever have good credit again?

    I meant to put chapter 7...not 13.

  2. #2

    Default Re: Sallie Mae - Confusing Disaster

    1) The benefit of paying them back on your defaulted student loan is that they may otherwise decide to sue you. Upon getting a judgment, they can collect whatever non-exempt assets are available to them under the laws of your state until the judgment is satisfied.
    2) This will come off your credit after a few years. The reason that folks are telling you not to default on student loans is that you don't have bankruptcy available to you regarding student loans. So you're basically stuck either paying the debt or living with the debt over your head, playing chicken with the creditor hoping it won't sue you.
    3) I think you're asking here whether there is any way to get out of the debt. Not really. You could file a Chapter 13, which will force the loan into a payment plan, but the remaining balance will still be there once your 13 is complete. Some folks with massive student loans live perpetually in back-to-back 13s, because the payment to the student loan creditor under the 13 is less than any wage garnishment they would suffer if they were sued. You could just stop paying them and bet that they won't sue you. If they wait too long to sue, and if the loan has no federal backing, they are subject to your state's statute of limitations requirements and you could use that as a defense in court, but we're talking several years without paying them before this is even an issue. There really aren't a lot of good options. Just a lot of bad ones. Picking the least bad one is the trick.

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