What happens if we don't pay private student loans?

[cwilliams]

We just filed Chapter 7 on about $24K in unsecured debt. I have student loan of about $19K in the direct loan federal program but I have $45K in private loans. The private loans are in deferment and are about to get out but I need to ask for one more to get us through the BK. They are serviced with AES and they are asking for about $1500 month that I know I cannot pay.

What will happen if I just pay back the direct loan through the government and not pay the private loans? Will they eventually go to a collection agency? Would they possibly settle for a lower amount?

The loans are in my name only and at the moment I am self employed, so I cannot be garnished. I am looking at getting a job once we move, though, that will probably pay about $25K a year. We are letting our house go and will be renting, so we will have no assets at all, so even if they sue me I have nothing to give them.

So what will happen if we just don't pay the private loans?

[VirginiaGuy]

There is a rumor that your student loans will go into bankruptcy forebearance until your bankruptcy is complete. Even though they aren't discharged, it makes sense that student loan companies may do this just in case something out of the ordinary happens and the court decides that the loans would be an undue hardship or whatever the term may be.

Anyway, if you don't pay your private loans, the total amount will come due upon default in around 180 days. They probably won't settle because they know that you can't discharge them and it would be worth it for them to sue you and garnish over the course of your life (and you may at some point be garnishable). Your student loan debt is much less than mine and yet your payment is higher. Why don't you see if you can get on another payment plan? Maybe you can get on a longer-term payment plan or a graduated plan where you pay lower monthly payments now and higher ones as the years progress. Student loans will be with you until you pay them off; the laws were changed to pretty much give all the bargaining power to the student loan companies. I treat mine like rent or food --- they stay at the top of my priority list.

[cwilliams]

At this point I cannot pay anything. Even without paying the mortgage we're struggling for gas money. If I'm garnishable at some point in the future then they can try to sue me then, I guess. They do have a graduated plan they told me about before but between rent, gas, groceries, utilities, etc. on mostly my dh's paycheck I don't know what we'll do. We need to do up an expected budget based on our expenses for after our move. That may make things a bit clearer.

In the meantime, we are considering speaking to an attorney at legal aid about this and see what they say.

[bkmaggster]

At this point I cannot pay anything. Even without paying the mortgage we're struggling for gas money. If I'm garnishable at some point in the future then they can try to sue me then, I guess. They do have a graduated plan they told me about before but between rent, gas, groceries, utilities, etc. on mostly my dh's paycheck I don't know what we'll do. We need to do up an expected budget based on our expenses for after our move. That may make things a bit clearer.

In the meantime, we are considering speaking to an attorney at legal aid about this and see what they say.

I haven't paid my private student loans in almost a year. Nothing has happened to me. YMMV.

[cwilliams]

Thank you, BKMaggster. I appreciate your reply. Have you been getting collection calls or anything?

[lrprn]

Defaulting on your private student loans works the same way as defaulting on any loan does. It allows the lender to take you to court to get a judgment to let them garnish your wages. How much they can take depends on your state garnishment law.

Defaulting on your government student loans allows additional things to happen - the IRS can intercept tax refunds, govt can take certain govt benefit payments up to defined levels, etc.

Read here to see everything that could happen if you default on private and govt student loans - http://www.nolo.com/article.cfm/obje...3/208/135/ART/ . It's not a pretty picture. For example, did you know that the federal govt has no statute of limitations to attempt collection against defaulted govt student loans? This could chase you for the rest of your life until at least the federal loans are paid off. Private collection efforts will be intense as well, and depending on the agreement you signed, could have lengthy statutes of limitation as well.

Here's a helpful link that explains your options when you can't pay your student loans - http://www.nolo.com/article.cfm/pg/1...3/208/135/ART/ . Take a look to see if any of these options might help in your case - I hope so!

[bkmaggster]

Thank you, BKMaggster. I appreciate your reply. Have you been getting collection calls or anything?

No, but I have moved several times and changed my phone number several times. They called my mom once and she told them she had no idea where I was and they never contacted her again.

I am not recommending this course of action, and I owe far less in private loans than you do. I am "judgement proof" right now, but I do expect this to catch up with me later.

To me, it was more important to pay for housing, utilities, and food right now.

I continued paying my federal loans during this time period.

[debtprison]

Don't be too sure that they can't garnish you because you are self employed. Unless you work as something like a taxi driver and get paid in all cash by random customers.

If you receive checks and 1099s one of the first things they could do is send levy notices to all the people who regularly send you checks. Don't forget they can also go after your bank accounts.

[cwilliams]

Don't be too sure that they can't garnish you because you are self employed. Unless you work as something like a taxi driver and get paid in all cash by random customers.

If you receive checks and 1099s one of the first things they could do is send levy notices to all the people who regularly send you checks. Don't forget they can also go after your bank accounts.

I have researched this to the best of my ability and nothing I can find states that a private student loan or any private loan company can do anything to my bank account. They can file a suit and that is all, the same as any other unsecured debt. To make extra sure, though, I am setting up an appointment with legal aid in the next two weeks to verify the information.

I only receive 1 1099. Everything else is through Paypal.

I do plan to pay my federal student loans. However, I don't believe there is any way I can ever pay my private ones on the income I have.

[Amy26]

Call the lender and see if you are eligible for voluntary forebarance. Sallie Mae offers me this on my private loans (for a 50 dollar fee) and my federal loans for free.

I have over 100k in federal and private student loans. I have never paid a penny yet so far on my federal ones as they have been in voluntary forebarance for a long time. Luckily my Chase private loans are still in deferment until the end of next year.

All my loans were in limbo during the bankruptcy and now that I'm out, they returned to a deferment status. If you can get them deferred for a year or 2, then perhaps later on you can refinance them or something. Hopefully the economy will be better then. That's what I'm going to do.

[backtoschool]

I have researched this to the best of my ability and nothing I can find states that a private student loan or any private loan company can do anything to my bank account. They can file a suit and that is all, the same as any other unsecured debt. To make extra sure, though, I am setting up an appointment with legal aid in the next two weeks to verify the information.

I only receive 1 1099. Everything else is through Paypal.

I do plan to pay my federal student loans. However, I don't believe there is any way I can ever pay my private ones on the income I have.

They can garnish your pay. They also can tack on a 25-40% "admin fee" once you go into default.

They also can get a judgment through a lawsuit and get at your bank account just like any other creditor can.

[TeacherMomma]

You should not have to waste a forbearance on getting you through the BK process. Once you file, it will go into a BK suspense/forbearance.

I have substantial SLs, and have gone periods without paying them, and the do call me a lot....but I have a Blackberry and an app on there that can make certain calls go to voicemail and so I set it to defer all unidentified callers to VM, and once I get a call from a # I add it to the app and it goes straight to VM the next time they call......I did it from about last October to May when I filed BK.

I'm about to find out what they are gonna do now that the BK didn't work!