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  1. #1
    Join Date
    Jan 2014
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    6

    Default Impact of a Cosigner's Bankruptcy on a Student Loan

    My question involves collection proceedings in the State of: Ohio



    My mother cosigned on 3 of my student loans for me. Well she filed for bankruptcy recently and neglected to tell me beforehand. I found out a few days ago when I logged onto AES to make a payment and discovered my loan was listed as defaulted, and showed the balance was zero. Pretty surprising to me as I've never missed a payment and the loan was current. I called them and they told me my cosigner declared bankruptcy, and per their standard procedure the loan immediately defaulted and was sent to NCO. I called NCO and they don't even have the loan in their system yet (have to call back Monday). The nice woman informed me however that while I could continue to pay the loan (of my own will, they can't ask me to pay), as soon as my mother leaves bankruptcy the loan will be discharged to "collections." My mother made a huge mistake filing for bankruptcy (she was trying to force her credit card debtors to work with her on lowering payments) and she is actually backing out of bankruptcy as early as this coming week. She didn't even meet the means test, which her lawyer had told her she would (a whole different story).



    Anyways, what can I do here? What should I expect? I'm wondering if NCO is going to try to attach any collections/handling/late fees or anything to my loan? If they do how do I fight that, since it's utterly outrageous that I should receive any fees for a loan that was in PERFECT standing. I'm also worried whatever collections group they send it too is going to just be a nightmare to deal with. I am waiting to see them attach their own fees and then tell me the entire amount is due immediately and pressuring me to pay on it right away.



    What do I do here? What are my options? I'm exploring a consolidation loan from a local credit union, with the goal of buying out the loan from NCO and just dealing with the CU... but ironically enough it looks like I won't be able to without a cosigner (thats what got me into this problem in the first place!!!!).



    Advice and suggestions?

  2. #2
    Join Date
    Sep 2011
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    OH10
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    17,019

    Default Re: My Cosigner Declared Bankruptcy, Aes Discharged My Loan to Nco, What Do I Do/What

    It was not in perfect standing. The cosignor filed for bankruptcy. Even if she were released, it does not release you. Ask them if they will reverse/stay the process since she will be withdrawing the filing.

  3. #3
    Join Date
    Jan 2014
    Posts
    6

    Default Re: My Cosigner Declared Bankruptcy, Aes Discharged My Loan to Nco, What Do I Do/What

    Quote Quoting Disagreeable
    View Post
    It was not in perfect standing. The cosignor filed for bankruptcy. Even if she were released, it does not release you. Ask them if they will reverse/stay the process since she will be withdrawing the filing.
    I have talked with both AES and NCO about returning the loan to AES servicing, both have emphasized that is not an option.

    And who said anything about releasing me? I'm not trying to get out of the student loan, I have every intention of paying it. I just don't plan on being screwed over and having fees and whatnot added onto a loan which has a sterling payment history and was 100% current. It's not as if I failed to make payments, or it was months behind or something. Hell, I was online paying it early when I found the problem.

    Anyone else? What should I expect, what options do I have?

  4. #4
    Join Date
    Sep 2011
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    OH10
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    17,019

    Default Re: My Cosigner Declared Bankruptcy, Aes Discharged My Loan to Nco, What Do I Do/What

    Are all of these gov't or are some private student loans? Federal loans give you more friendly options from a repayment perspective. Finding a new cosigner can also likely aid you in cleaning this up.
    http://studentaid.ed.gov/repay-loans/default/get-out

  5. #5
    Join Date
    Apr 2009
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    Somewhere near Canada
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    35,894

    Default Re: My Cosigner Declared Bankruptcy, Aes Discharged My Loan to Nco, What Do I Do/What

    And outside of that, the only thing that comes to mind is you paying it off and then trying to sue Mom for reimbursement.

  6. #6
    Join Date
    Jan 2014
    Posts
    6

    Default Re: My Cosigner Declared Bankruptcy, Aes Discharged My Loan to Nco, What Do I Do/What

    Quote Quoting Disagreeable
    View Post
    Are all of these gov't or are some private student loans? Federal loans give you more friendly options from a repayment perspective. Finding a new cosigner can also likely aid you in cleaning this up.
    http://studentaid.ed.gov/repay-loans/default/get-out
    I have a mix of federal and private loans, but the loan in question (the AES loan that has now been discharged to NCO) is a private loan. I have talked with my brother and father (my parents are divorced) about cosigning on the consolidation loan. Neither is thrilled with the idea. I am going to call the Credit Union on Monday and see if using my 401k as collateral (I have around 20,000 in there now and the loan in question is around 21,500) is an option.

    Can anyone tell me if NCO is going to try to add fees? Or the collections group they send it too?

  7. #7
    Join Date
    Sep 2005
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    Behind a Desk
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    98,846

    Default Re: My Cosigner Declared Bankruptcy, Aes Discharged My Loan to Nco, What Do I Do/What

    Quote Quoting Dogmatique
    View Post
    And outside of that, the only thing that comes to mind is you paying it off and then trying to sue Mom for reimbursement.
    These aren't mom's loans, and mom doesn't violate any duty to her daughter by filing for bankruptcy protection, so I don't see that getting her anywhere.

  8. #8
    Join Date
    Apr 2009
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    Somewhere near Canada
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    35,894

    Default Re: My Cosigner Declared Bankruptcy, Aes Discharged My Loan to Nco, What Do I Do/What

    True enough. I didn't consider the "ownership" issue.

  9. #9
    Join Date
    Sep 2011
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    OH10
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    17,019

    Default Re: Impact of a Cosigner's Bankruptcy on a Student Loan

    A bit of research turns up that you can rehab this loan by making 12 monthly, timely payments it appears. Discuss the issue with your original lender and NCO.

  10. #10
    Join Date
    Jan 2014
    Posts
    6

    Default Re: Impact of a Cosigner's Bankruptcy on a Student Loan

    Quote Quoting Disagreeable
    View Post
    A bit of research turns up that you can rehab this loan by making 12 monthly, timely payments it appears. Discuss the issue with your original lender and NCO.
    When I talked with NCO on Friday they told me that the rehab program, which would move the loan back to AES after so many good/on time payments, is no longer available. I will ask about other rehab programs when I call them this afternoon.

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