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  1. #1
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    Default Recourse Against Cosigner That Spent Part of Student Loan on Personal Expenses

    My question involves a student loan debt issue in: Indiana

    My wife and I found out that her mother spent about $30,000 (original balance) of her student loans between 2004 and 2006 on supporting their family while her father was trying to get a small business off the ground. Although she has admitted this to us on several occasions, we don’t have any tangible proof right now. Her mother is currently making minimum payments on the debt, which has a $90,000 balance. My wife is the primary borrower, and her mother is the cosigner on both loans.

    My question is this: is there anything we can do to limit our liability in this situation? I know I’d be wasting my time with the lender. As of this moment, this isn't a monthly cash flow problem because her mother is making payments. However, there is an extra $90,000 of debt sitting on my wife’s credit report. This debt has already ruined her ability to qualify for a joint mortgage, such that our house is in my name only. Additionally, her mother leads an unhealthy lifestyle (smoker, works third shift, eats processed food, drinks Coca-Cola by the gallon) and we’re afraid the debt will outlast her ability to pay. We've asked her to take out a life insurance policy with the lender as the beneficiary, but she refused. Plus, that doesn't help us if she retires or becomes disabled and can no longer make payments. Once her mother stops making payments for one reason or another, the debt will become wholly our problem; her father has completely abdicated all responsibility for it.

    I don’t know if my wife would be willing to pursue criminal charges against her mother, and even so, I think the statute of limitations on this has long since expired since the first loan was taken out nine years ago. I heard somewhere that SOL starts from when the offense is discovered, not when it was committed; even then we’re in year five. As far as civil action, I don’t know what good that would do either, unless a judge can somehow order my wife’s name to be removed from the loan (I know that’s unlikely). Basically, it’s a “you can’t get blood from a turnip” situation; her parents aren't indigent by any stretch, but they aren't loaded either.

    The only two positive things that I envision could come of this are 1) her mother is ordered by a judge to get life and/or disability insurance that protects us from having to pay the debt if she stops paying, or B) we get a structured settlement, cash it in somewhere, and use it to pay the loan off. Then her mother will owe the balance of the settlement to Wentworth or whatever and the debt is off our books. Can you even get a structured settlement on a non-injury case though?

    Any guidance on this matter will be greatly appreciated. Thank you.

  2. #2
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    Default Re: Recourse Against Cosigner That Spent Part of Student Loan on Personal Expenses

    Sorry, but your wife's loan is 100% her obligation to the lender regardless of what her mother does, or did.

    The only risk her mother has is if your wife defaults on the loan. Then the lender can go after her and her mother.

    I seriously doubt that the criminal authorities are going to get involved in any prosecution because the big question that comes to mind is how did her mother get her hands on the money in the first place? If the loan was in your wife's name, the checks should have gone to your wife. Second question is how did your wife not know that her mother was getting to the money? Seems pretty stupid to me to borrow $90,000 and not keep track of it.

    As for a civil lawsuit against the mother. Yeah, your wife can sue her. But all the court can do (if your wife can satisfactorily prove a tort or breach of contract and the SOL hasn't expired) is issue a judgment in your wife's favor and then it's up to your wife to enforce. The one thing a court can't and won't do is remove your wife from the loan. That's her obligation forever. Nor will the judge ever order anybody to buy life or disability insurance.

    Structured settlement? Doesn't exist for your scenario.

  3. #3
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    Default Re: Recourse Against Cosigner That Spent Part of Student Loan on Personal Expenses

    The part of this story that stinks to high heaven is the allegation your wife did not have control over all this money she borrowed. You are not going to get a company foolish enough to get involved in this melodrama.

  4. #4
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    Default Re: Recourse Against Cosigner That Spent Part of Student Loan on Personal Expenses

    First of all, you can keep your condescension. I didn't go into painstaking detail about the circumstances in an effort to keep my question as concise as possible. The question guidelines at the top of the page ask for that specifically. Besides, any thinking person would surely surmise that a dispute over tens of thousands of dollars between a person and her parents is probably quite complex, not a simple matter of someone "not keeping track of" $90,000.

    There were two loans taken out, both for $32,000, between 2004 and 2006. During that time my wife was in her freshman and sophomore years at college. She was always told her parents would pay for her education, and she trusted them wholly. I would hardly consider an 18- or 19-year-old negligent if her parents give her a document to sign and she doesn't think twice about it. She had no idea at that age that her parents might abuse that trust and spend money that she would be obligated to repay later. The loans have a present balance of $90,000 because of years of interest capitalization.

    To answer your questions, I think it is quite simple for her mother to get her hands on the money, although I'll admit I'm speculating. If I remember correctly, private student loans like these issue checks to the borrower and cosigner directly. When the check was sent to her parents' address, her mother probably took it to the bank and deposited it, simple as that. Even if she encountered resistance by the teller because the check was made out to her AND her mother, I can imagine that most bank tellers in their quiet suburban town would deposit it anyway if the mother says "my daughter is away at college and this is her tuition money." Again, that's speculation, but a likely scenario.

    As to your second question, all the documentation for these loans was sent to my wife at her parents' address. Most undergrads list their parents' address as their permanent address, particularly while living in the dorms. I don't see what is so surprising or unusual about that.

  5. #5
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    Default Re: Recourse Against Cosigner That Spent Part of Student Loan on Personal Expenses

    Quote Quoting anonymoose
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    First of all, you can keep your condescension. I didn't go into painstaking detail about the circumstances in an effort to keep my question as concise as possible. The question guidelines at the top of the page ask for that specifically. Besides, any thinking person would surely surmise that a dispute over tens of thousands of dollars between a person and her parents is probably quite complex, not a simple matter of someone "not keeping track of" $90,000.

    There were two loans taken out, both for $32,000, between 2004 and 2006. During that time my wife was in her freshman and sophomore years at college. She was always told her parents would pay for her education, and she trusted them wholly. I would hardly consider an 18- or 19-year-old negligent if her parents give her a document to sign and she doesn't think twice about it. She had no idea at that age that her parents might abuse that trust and spend money that she would be obligated to repay later. The loans have a present balance of $90,000 because of years of interest capitalization.

    To answer your questions, I think it is quite simple for her mother to get her hands on the money, although I'll admit I'm speculating. If I remember correctly, private student loans like these issue checks to the borrower and cosigner directly. When the check was sent to her parents' address, her mother probably took it to the bank and deposited it, simple as that. Even if she encountered resistance by the teller because the check was made out to her AND her mother, I can imagine that most bank tellers in their quiet suburban town would deposit it anyway if the mother says "my daughter is away at college and this is her tuition money." Again, that's speculation, but a likely scenario.

    As to your second question, all the documentation for these loans was sent to my wife at her parents' address. Most undergrads list their parents' address as their permanent address, particularly while living in the dorms. I don't see what is so surprising or unusual about that.

    I don't see that you have any legal issue here. Your wife had to sign and acknowledge the application for financial aid. Be thankful that your mother-in-law is making the payments. When and if she stops, make sure your wife is ready to make payments on her debt.

  6. #6
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    Default Re: Recourse Against Cosigner That Spent Part of Student Loan on Personal Expenses

    Quote Quoting Antigone
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    I don't see that you have any legal issue here
    Did you read my original question? Her mother took her student loan money and spent it without my wife's knowledge or consent. That sounds like some flavor of theft or fraud to me, but then I'm not a lawyer or else I wouldn't be here. Does her mother have some legal right to the money because she's the cosigner? Even so, she obligated my wife to the debt and spent the money on herself.

    Quote Quoting Antigone
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    Your wife had to sign and acknowledge the application for financial aid.
    This is obviously the sticking point, and I fully understand why. I suppose what I'm getting at is that her mother abused my wife's trust and got her to sign the documents without really understanding what she was signing. From what I've seen here so far, I'm sure that doesn't matter legally, and have a feeling nobody here is going to be sympathetic. However, it's hardly inconceivable that that kind of abuse can easily take place, particularly when it involves a parent-child relationship.

    Quote Quoting Antigone
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    Be thankful that your mother-in-law is making the payments
    Quote Quoting Antigone
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    make sure your wife is ready to make payments on her debt.
    You guys really can't help yourselves, can you? Is the purpose of this forum to help people with legal questions or to get your kicks taking thinly-veiled jabs at people who come here for advice?

  7. #7
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    Default Re: Recourse Against Cosigner That Spent Part of Student Loan on Personal Expenses

    Quote Quoting anonymoose
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    Did you read my original question? Her mother took her student loan money and spent it without my wife's knowledge or consent. That sounds like some flavor of theft or fraud to me, but then I'm not a lawyer or else I wouldn't be here. Does her mother have some legal right to the money because she's the cosigner? Even so, she obligated my wife to the debt and spent the money on herself.



    This is obviously the sticking point, and I fully understand why. I suppose what I'm getting at is that her mother abused my wife's trust and got her to sign the documents without really understanding what she was signing. From what I've seen here so far, I'm sure that doesn't matter legally, and have a feeling nobody here is going to be sympathetic. However, it's hardly inconceivable that that kind of abuse can easily take place, particularly when it involves a parent-child relationship.




    You guys really can't help yourselves, can you? Is the purpose of this forum to help people with legal questions or to get your kicks taking thinly-veiled jabs at people who come here for advice?
    Look, your wife has had knowledge of this debt for years and has never played the "I've been defrauded card." If she didn't play that card when she found out about this debt, then she is going to have a lot of trouble playing that card now.

    Sorry this is not what you want to hear but this is how your situation has played out. This is your wife's debt.

  8. #8
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    Default Re: Recourse Against Cosigner That Spent Part of Student Loan on Personal Expenses

    The key word you keep trying to pretend never happened here is COSIGNER. Your wife is not a victim. That ship sailed years ago. You are the victim. If you do not want responsibility for her actions, divorce her, take your assets and run.

  9. #9
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    Default Re: Recourse Against Cosigner That Spent Part of Student Loan on Personal Expenses

    We've spent the last five years trying to work something out with her parents to avoid the legal system. Her parents may be thieving scumbags but it's still her family and most people are reluctant to throw their own parents to the wolves, even in a situation like this. Her mother is indeed paying the payments right now, but as I mentioned before, we are concerned that the loan will outlast her willingness and ability to pay because she is only paying the minimum. That is the reason for exploring legal avenues for resolving this after so much time has passed. That may be irrelevant in the eyes of the legal system, and if so then I have no choice but to accept it and move on, but that's the reason for the long delay.

    You're right, it's not what I want to hear, but I can deal with getting a different answer from what I was hoping for. What pisses me off is being condescended to by people a free, publicly available internet forum in which participation is 100% voluntary...meaning nobody compels anyone to post questions or answers in any thread. There is a distinct stigma associated with having student loans (which baffles me since Americans owe $1T in student loans) and far too often, people that seek advice about these loans are automatically looked at as deadbeats that are just trying to weasel out of their debt. Maybe I'm being oversensitive, but I didn't expect the tone of this discussion to be what it is.

  10. #10
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    Default Re: Recourse Against Cosigner That Spent Part of Student Loan on Personal Expenses

    Quote Quoting anonymoose
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    We've spent the last five years trying to work something out with her parents to avoid the legal system. Her parents may be thieving scumbags but it's still her family and most people are reluctant to throw their own parents to the wolves, even in a situation like this. Her mother is indeed paying the payments right now, but as I mentioned before, we are concerned that the loan will outlast her willingness and ability to pay because she is only paying the minimum. That is the reason for exploring legal avenues for resolving this after so much time has passed. That may be irrelevant in the eyes of the legal system, and if so then I have no choice but to accept it and move on, but that's the reason for the long delay.

    You're right, it's not what I want to hear, but I can deal with getting a different answer from what I was hoping for. What pisses me off is being condescended to by people a free, publicly available internet forum in which participation is 100% voluntary...meaning nobody compels anyone to post questions or answers in any thread. There is a distinct stigma associated with having student loans (which baffles me since Americans owe $1T in student loans) and far too often, people that seek advice about these loans are automatically looked at as deadbeats that are just trying to weasel out of their debt. Maybe I'm being oversensitive, but I didn't expect the tone of this discussion to be what it is.
    Yes you are being senstive and no I don't believe there is a negative connotation associated with student loans. Most doctors, lawyers, and a host of other professionals carry this type of debt.


    And insofar as AJ's and my tone, you infer what you want, it is no skin off our backs. We gave you accurate information and if the delivery was not to your liking, I suggest you ask the owners of this forum for a refund.

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