Student Loan Co-Signer, who filed Chapter 13.

[Micha]

I co-signed my daughter’s private student loans in 2003-06, and have paid on the loans since day 1. My daughter graduated in 2007, and has been paying the loans on-time ever since graduation. I lost my job in 2008, and filed Chapter 13 in April 2009.

As of June 22nd, 2011, we just found out (by inquiry), that Citibank declared the loans from 2003 and 04 as default due to my bankruptcy, and sent them to a collection agency which we have not heard from yet.

1) Why would they do this when the payments were being made, and
2) Her credit report now says the two loans are in bankruptcy.

She tried to consolidate all the loans yesterday, but was denied due to her credit report. Otherwise her credit was great up until now!

How do we dispute this? There has been no negligence on her part, and now she is an innocent bystander paying for my problems.

BTW my lawyer told me from the beginning she would not be affected in anyway by my filing. We tried to speak to him yesterday and his assistant told me he advised us to go to another lawyer.

Thank you in advance!

[KeithDoxen]

Welcome to the private student loan victims club! Cookies and punch are served every Thursday.

Unfortunately, you and your daughter have just walked into the trap that I and so many others have walked into with private student loans. Most private student lenders insert a clause in the contract stating that if any of the signatories files for bankruptcy protection, the lender has the option of considering the loans to be due in full immediately. To them, it's the equivalent of a default. That's what it will look like on your credit report. And your credit score will be impacted in turn.

Why do the lenders do this? Who knows. Maybe they assume that if any of the signatories are bankrupt, they will never be repaid and so it's best to pass the buck to the guarantor. Here's something you might not know: most private student loans have guarantors who are bound to foot the bill for the original lender if default occurs. So your original lender, probably some bank whose name is buried within your original promissory note, has decided that it wants to take this opportunity to be paid in full by the guarantor, and make collection of the loan the guarantor's problem. Guess who gets hurt. The consumer. And in this case, your daughter, who didn't do anything wrong.

The whole system really, really sucks. And while you may want to talk to another attorney, my guess is that the student loan company is legally able to take all of these actions. What I would try to do is call the lender and explain the situation to them and try to get them to rehabilitate the loan. There's a small chance they may agree and take it out of default. Otherwise, talk to an attorney about your options. And please let us know how it turns out.

[IamOld]

If nothing else works, I'd try sending a cert letter to Citibank's CEO Vikram Pandit in NYC- your best weapon is that the banksters were and are getting their $$ every month...sometimes such a letter rattles things...I'd even CC NYS atty gen's office just for the heck of it...

[Micha]

Thank you for both your suggestions. We are making a little headway, but it sounds like it will come down to a lot of letter writing, and he said she said stuff. As of late Thursday night, Citibank has now blocked us from the student loan website, we cannot even log on and see the loans or the remaining loans (according to them they don't do that). Thank goodness we printed out a bunch of information the day before.

I'll keep you posted! Thanks again.

[gml120]

I fought with Key Bank for MONTHS over this exact same thing. Only in the reverse. I filed for bk, my cosigner got the collections call. "Supervisors" reviewed my case 3 times and always came back with "Sorry, we can't take this out of default, would you like to write a check for the full amount right now? We can take a check over the phone." I filed a complaint with the OCC and low and behold a few days later, Mr. Brett Trimble, Executive in Client Relations of Key gave me a call. It still didn't change anything but it was nice to have an actual person with some sort of responsibility to yell at over the phone. You really have no rights at this point, I haven't found a single attorney that knows as much as I do about the laws governing these loans that I do after researching. Go ahead and call citibank everyday and beg and plead but I doubt it will do any good. Writing letters will probably just go in the trash. I would focus on trying to find some money to offer these vultures as a settlement so they stop reporting this loan as defaulted to the credit bureaus asap. Whatever they tell you positive about what they will do about your credit report will be a lie. Expect to see a charge-off on there every month or every other month until you either pay the whole amount, or agree on a settlement. Even if you arrange a payment plan to pay X per month while it's in default it won't matter as far as your credit report is concerned. They won't report that you are paying anything so don't fall into that trap. And remember, while it's in default, they can charge whatever collections fees (usually 40% of the original loan) and interest rate they like and don't have to tell you what it is. The longer you wait the worse it becomes.....exponentially!. The original loan amount and your payment history is irrevelant once they default the loan. Write the OCC, at least the bank has to by law respond to your complaint.

[Micha]

New Positive Update

Thank you for your email. I've been meaning to update this as our situation changes daily. Now 4 of the 6 loans have been sent to collections and the other two are supposedly under review. All 6 loans have been reported on the credit report, and have been reported closed and in collections, two still saying "Include in Bankruptcy."

We wrote letters to Citibank, TransUnion, Department of Education, and the Fair Trade Credit Act. We also seeked the help of a lawyer. Under the Fair Trade Credit Act what Citibank has done is wrong and TransUnion is also at fault, especially because the loans have never been in default, all payments have been made, and I am a Co-signer. Also under the Fair Trade Credit Act all lawyers fees are covered. The lawyer fees are paid by the lawsuit against TransUnion and Citibank, and the lawyer is going after both of them. He specializes in consumer law and they have had other successful cases when dealing with the same situation but credit cards. This is his first student loan case, but he's excited, and feels we will be successful in getting everything off the credit report and stop Citibank from reporting anymore false information. Once this is cleared up we still have the collections to deal with, but my biggest issue is getting this off her credit so she can move on. I should note, that Experian and Equifax, are still reporting positive information.

So there is hope, just be persistent and do a lot of research. This site definitely helped begin the process. I will update again when we hear back from the Lawyer, he should have some answers for us by early next week.

I'm sure I can pass along the law firm info if someone needs it, they do free consultations and are located in Philadelphia, although they handle many states (we currently live in FL).

[gml120]

Thanks for the update! The name of the firm would be great information to have on hand - I actually live near Philly, oddly enough. I would LOVE to get in on some class action suit against these corporations. It's hard enough to go through a bankruptcy and then get slammed with this at the same time AND it be a surprise, almost makes you want to go insane. Thanks again.

[Micha]

We are also from PA (Bucks Co.) area, before moving to FL a few years ago, miss it. Glad to help, this whole process between the bankruptcy and this new situation has been very stressful, so believe me I feel your pain. This firm has been a great help, we were not able to find anyone down here that seemed to know anything like these people do. Here's their info:

Francis & Mailman
215-735-8600
website: consumer law firm .com

This response won't let me post the whole website, just put www in front and no spaces between the words. The website gives you lots of info and if you write them they will call you right away. Good luck.

[gml120]

You're right! These people are great! The man I talked to has been more helpful in 15 minutes than anyone I have talked to in the last year about my issues. Thanks so much for posting the info, luckily I saved all the relevant information necessary to begin a suit. I'll keep you posted Micha

[IamOld]

Guys, does this firm only work for people living in PA???

[gml120]

I would think they could help if you live outside PA, wouldn't hurt to call and find out.

[IamOld]

Thanks!!!!!!

[Micha]

I am so happy they are able to help you! Good Luck with everything.

[Micha]

Yes, they work with people from many states. We live in FL now, and they are handling our case.