Post-BK Student Loan Issue

[phat2009]

I filed for Chp. 7 in 2006, with the discharge in 2007. At the time, my attorney told me my private student loans were being discharged, which was entirely untrue as I've known now for a while. That is not why I am writing, it is for context.

Here is my situation with one of the loans. I am unsure what to do at this point. I had three loans serviced by AES. Two were government loans and during BK those were properly handled in terms of the stay and then when I recommenced school placed back into in-school deferred status. A third loan that they had, which was a TERI loan (I believe that was the original lender), got all fowled up. In case it is important, during BK, my school was a creditor and refused to allow me to register until my BK was discharged. So, I was out one semester during the BK.

For starters, during the BK, the TERI loan had a collection agency attempting to collect. I wrote to that agency several times to tell them I was in BK and that there was a stay, to no avail. They kept sending letters and would not address them to my attorney.

Then, I attempted to deal with AES, who kept stating that loan was not in deferment after the BK due to in-school status, even though the other two loans they serviced were. First, it was fill out this form and send it in. Then, it was "we never received the form." Then, it was "all set" over the phone. Then, it was "oh, no, you need to fill out THIS form." Then it was "we did not receive the form in time so we defaulted it and sent the loan back to TERI." I called TERI and spoke to a rep who said she'd call me back, but she never did. I sent out certified letters to all concerned, TERI, AES, the collection agency, etc., trying to straighten it out. No responses from anyone. Tried calling TERI again and they were in bankruptcy.

Fast forward a year and a half later of this nonsense, and a collection agency is now calling me regarding the loan. They have claimed various things, such as my BK automatically sent the loan into default and that is why they ended up with it. They have also stated that they have heard the same story from others regarding AES's handling of their accounts -- lost deferment forms, wrong deferment forms, then bing, the person is defaulted and it is sent to this collection agency. Others apparently had BKs, too, because I was told of one man whose position was his loan was discharged.

Anyhow, I have asked this collection agency to send me whatever paperwork they have but it has been almost two months and I have received nothing (and yes, I have followed up). They also told me to contact AES to see if I can get the status of the loan straightened out and back off default. On a conference call, we also tried TERI but again, no one there will speak to me or return my calls.

I have called AES, they will not give me any information, not even a copy of all of the records of my calls to them during the time they had the loan (which proves all of my numerous efforts to get it in in-school deferred status if it was not discharged in BK, as well as their representations to me that it was "all set" at one point).

This is just ridiculous and maddening that I cannot get anywhere with these folks.

I can see from other messages that questions pertaining to whether student loans are discharged is a hot button for those feeling like they are a broken record in saying they are not. I do get it, I was sorely misinfomred by my attorney and there is nothing I can do; my intent is not to annoy with that same overarching question.

What I want to know, however, is IF the loan did default when I filed BK, then why does that lender not have to appear to state that to the trustee at the BK, since it seems like that gives them a priority over other creditors if they can just waltz in and demand the entire amount at once?

I would also like to know if a student loan sold to a collection agency is still a student loan, or does that convert it to something else?

Is there anything else I can do here to get to the bottom of this loan whereas no one is providing me any information? Just because this collection agency says it is holding a note from TERI, how do I know without proof?

Thanks for any post-BK advice on this.

[lrprn]

What I want to know, however, is IF the loan did default when I filed BK, then why does that lender not have to appear to state that to the trustee at the BK, since it seems like that gives them a priority over other creditors if they can just waltz in and demand the entire amount at once?

Student loans are automatically placed into forebearance during bankruptcy. However, as soon as your bankruptcy is discharged and closed, the student loan payments start up again immediately.

Student loan holders do not have to appear before the trustee during your 341 any more than your other lenders did.

What appears to have happened is that you didn't start up your student loan payments after your Ch 7 was closed. That placed your loans in default and that's why the lenders started demanding payment in full.

I would also like to know if a student loan sold to a collection agency is still a student loan, or does that convert it to something else?

Nope. It stays a student loan no matter who buys it.

Is there anything else I can do here to get to the bottom of this loan whereas no one is providing me any information?

I suggest you do two things. First, get off the phone and get on paper. Send certified letters with return receipts to each of your SL lenders asking them to send you proof the loans in question are yours. If they do that, then send another round of certified, return receipt letters asking for a monthly accounting of your loan since each one started.

The second thing to do is to consider setting up a half-hour consultation with a lawyer in your area with experience handling student loan defaults. Your state bar association can give you leads about who that is where you live - http://www.abanet.org/barserv/stlobar.html - just click on your state. It's well worth paying the fee to get solid legal advice in this situation.

One thing for sure, whatever you are doing now on your own isn't making any progress sorting this out. Time to change tactics.

[phat2009]

Thanks!

Thanks very much -- will take the advice and write again.

Originally Posted by phat2009
What I want to know, however, is IF the loan did default when I filed BK, then why does that lender not have to appear to state that to the trustee at the BK, since it seems like that gives them a priority over other creditors if they can just waltz in and demand the entire amount at once?

Student loans are automatically placed into forebearance during bankruptcy. However, as soon as your bankruptcy is discharged and closed, the student loan payments start up again immediately.

--Part of the problem is I am getting different versions. The collection agency has been saying no, they are not automatically placed in forebearance -- according to them, the loan was automatically defaulted upon the filing of the BK.


What appears to have happened is that you didn't start up your student loan payments after your Ch 7 was closed. That placed your loans in default and that's why the lenders started demanding payment in full.

-- I was not required to due to an in-school forebearance. I was not registered for one semester during the pendency of the BK (and thus automatic stay/forebearance) and then went back to school -- so, the loan, like the others I have, should have gone into in-school deferment, but it did not due to AES giving me the run-around on the forms. The loan then went back to TERI, who went into BK, never responded to my certified letters, and who then sold it to the collection agency without ever allowing me to show AES's mistake regarding the in-school status.

Anyhow, as stated, I will write them all again and see about a lawyer, too. Thanks very much for your time.