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Private SL Settlement


TXStudentLoan
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So here's our story...

My, now, wife signed for a $10k student loan about 7 years ago while she was in and out of community college. She did not need the loan, rather her and her other 18 year old friends saw it as an easy way to quick money. The bank did not verify that she was in school, just cut her a check, which Im assuming she blew on clothes and shoes. It is a private student loan with WF. Anyways, she completed all of 15 hours of school after she got the loan but it has remained deferred until a year ago. Its balance now due to the crazy interest rate is hovering around 17-18k.

So as of today, my wife has not completed school, has no money, and has no job (nor dioes she plan on getting one) but the bank has termed the loan out over 10 years at $235 a month (totals over $28k). My wife cant pay this since she has no job so the loan is now in default. I am not paying for this debt primarily becasue I feel she was taken advantage of. Some loan officer saw easy origination dollars when he offered an 18 year old girl with no credit history a $10k student loan for a community college that cost at most $1500 a semester.

We share bank accounts and share title to our house at the moment. Can the bank or CA pursue a judgement on either of these assets? If so I will file a quit claim deed to remove her from the property and protect our home. That would basically make her judgement proof right?

Ultimately our plan is to not pay this debt or settle for pennies since I feel this was borderline predatory lending. Any advice is greatly appreciated. Thanks

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Hello TXStudentLoan-

The answer to your question is yes, the bank can file a judgement if it is determined she has assets in her name. In fact, she doesn't have to even have assets for them to file a judgement, but obviously they want to make any litigation case as efficient as possible so usually the only time they do persue litigation is if the borrower has assets and/or a job.

Here are a couple of things to keep in mind with this, though, if you intend to never pay the loan:

1) She will not be able to go back to school. Her name will forever be in the database for defaulted loan, and her original school will not release transcripts while the loan is in default. Additionally, she obviously wouldn't be eligible for financial aid. While the SOL applies to certain situations, the debt cannot be disgarded or forgiven, so she will always be in default, even in a bankruptcy.

2) Be prepared to fight off collection agencies for the rest of your lives. Again, SOL only dictates the effects on her credit and time allowed for litigation. It does not get rid of the debt, so the debt will still be owed and collectable even after SOL runs out.

3) You will need to make sure her name is off every asset you hold until SOL has expired, and DO NOT MAKE A PAYMENT! If you make a payment, the SOL starts all over again fresh. Her credit will be ruined, but the only way to prevent that at this point is to settle the debt or pay it in full.

I hope this answered your question.

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  • 2 weeks later...

Best thing you can do for your wife is make her get a job and pay this monster off.

It does not matter what you think about the loan, the fact remains, it;s a SL and it will never go away, the value ( interest) will always go up, it will get collected at some point.

By letting this thing grow, you are not doing yourself a favor......since SL's are forever, I dont see you settling this debt for pennies on the dollar, this is one debt you cant run from......your wife working a few hours per week is not going to kill her.....you best bet is to get this monkey off your back while you can.

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  • 2 months later...

"The bank did not verify that she was in school, just cut her a check, which Im assuming she blew on clothes and shoes. It is a private student loan with WF. "

Which is why those types of loans didn't conform to DOE standards making them dischargeable in BK. My cousin got a WF private loan issued in 2001 discharged in BK because it didn't conform to federal regs. Those loans also have an SOL. I've seen multiple boards where people have escaped those because of SOL.

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  • 2 months later...

"1) She will not be able to go back to school. Her name will forever be in the database for defaulted loan, and her original school will not release transcripts while the loan is in default. Additionally, she obviously wouldn't be eligible for financial aid"

How would defaulting on a none federal alternative not federally backed student loan affect further aid? Only federal loans come out on the NSLDS, is there another database for student loans i am not aware of? please let me know

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