Another private student loan nightmare..

[gml120]

My question (this time) is concerning a private student loan taken out by my husband, cosigned by his father. My husband can't make the loan payment, his father can no longer make the loan payment. The father wants to sue both my husband and myself to make us pay this loan. The loan itself is currently in good standing but the monthly payments are ridiculous and since Citibank says that if we can't pay the whole payment amount, a partial payment would be reflected the same as a zero payment and they won't reduce the amount either. We had a chap 7 discharge about a year and a half ago as well and are well aware it couldn't be included. Can I be sued because we're married? (loan taken out way before we were married). Can the father actually sue his son on a loan that he co-signed? Anyone have any experience on this kind of issue? Any other thoughts?

[HHM]

Could you be sued, yes? Will the father win, unlikely. Father cosigned the loan, "voluntarily", he agreed to be the guarantor in the event of default. As such, I don't see that the father has a valid cause of action against either of you; he assumed the risk.

What I mean by "could be sued" is simply that the father could file the complaint, the court is not going to verify it. You will need to appear and defend and I think it would be a very easy case for you to win.

[gml120]

Thank you very much. This is what I was also thinking. As far as this loan is concerned though. Aside from winning the lottery, it will most likely go into default in approx. 90 days. I'm envisioning a sort of 'strategic default' on purpose. This loan in particular started out around $40k and has ballooned into about $55k over several years of deferments and making only interest payments. Our financial situation has not changed and honestly I can't foresee it changing drastically in the next 3-4 years. We possess no real assets (house, new car, electronics, or land, etc..) Have no savings or 401k and are living paycheck to paycheck. And like I mentioned before, are about a year and a half out of a chap 7 discharge. I live in PA and am aware this state has no wage garnishment for private student loan judgements. I am not aware of his father's assets specifically but I know he has a house with land with a mortgage but I do not know how much the property is worth or how much is owed. I suspect if there is a suit brought by Citibank it would be on him. So. I do also know that PA is not a homestead state and therefore non-exempt from seizure/liquidation to settle a judgment debt. My personal opinion, with everything I know about Citi is they will default after 90 days of underpayment or zero payment and they offer no rehab and also just continue to jack up the interest rate to whatever they want and change the payment amount to whatever they want. I guess what I'm trying to get at is - how bad is a judgement credit wise? We already have a chap 7 for the next 7-9 years and I get the idea that the father has little or no assets worth $50k (this number will probably go up substantially after Citi adds on all their collections fees, late payment fees, and other bullshit they tack on). Is a strategic default / hope they sue and find us judgement proof a logical way to go? Or perhaps wait it out ignoring phone calls or collections letters thinking that the statute will run before they sue? Has anyone else went this route? I'm not trying to skip out on debt or stick someone else with it - its just factual numbers. To pay the amount they want on this loan every month would mean we can no longer afford our apartment and will become homeless. Any information would be greatly appreciated. thank you

[HHM]

Keep in mind, there is no Statute of limitations on "collection" of a private student loan, just on suing to collect.

I will take your word on PA law; however, even in no-wage garnishment states (there are only 4), they generally do allow bank account levy.

Judgments, no matter how you slice it are bad, so long as this student loan is out there, your credit will never fully recover. (note, if there is a lawsuit, it will be against everyone, not just the dad).

Frankly, it doesn't sound like you have a choice in the matter, there is nothing "strategic" about your default, you are simply defaulting because you can't pay The father probably has the problem and things are going to get pretty bad for him.

[NoMoreCards]

Maybe your husband and the father could work something where each pay a part of each payment. Still sucks for the father, but it sounds like he is screwed either way.

[Exployer1234]

This sucks all the way around. How much is your payments each month? Is there a way to consolidate the loans to lower the payments? I would check with an attorney to see what your options are at this point before you default. Once you default it may be harder for them to even work with you and can put you in worse shape. I would be calling them every day if you had to and speak to every supervisor possible to try to get something worked out. Even writing a letter addressed to the president of the company at this point explaining your situation may get something going.

[gml120]

Thanks for all the support everyone I'll keep posting - it's going to be an 'interesting' next few months.

[KeithDoxen]

so long as this student loan is out there, your credit will never fully recover.

Just for the sake of argument, let's say the OP defaults on this student loan. If the student loan company doesn't get around to the lawsuit stage until the SOL is up in PA (4 years from default), then the OP will have an affirmative defense against the student loan company going forward should the company decide to sue at any point after the SOL is up. At that point, wouldn't the OP's credit recover just as soon as the defaulted student loan falls off his or her credit report? This assumes, of course, that the student loan company doesn't sue within four years of default. Doing so would result in a judgment against the OP that would haunt the OP for a long, long time.

[gml120]

This is kind of what I was also thinking, Keith. Since the BK we haven't acquired any new assets of any kind and can't imagine something substantial like a house or a new car any time soon. There is another piece of information as well - my husband (about 2 years ago now) let his private loans with Key Bank default. The weird thing with those is that no one has ever called him or his father (co-signer) or written a letter of any kind since. It does show up on the credit report as 'defaulted, ~$15k past due, chargeoff every other month since then but I get the feeling like this creditor is sitting back waiting until we have something to take to bother suing over it. I'm hoping (praying) that maybe Citi will do this too? The difference between the two loans however is the balance - from all the deferments he's taken over the years this Citi loan has ballooned to just over $50k. The deferments came at a time when we were trying to decide whether or not to take the chap 7. In any case, I'm figuring these people have access to what we own and don't own and using it to decide as to when and if they will sue. If I was them I wouldn't bother suing us since judgement or no, even if they levy our entire bank account tomorrow, they will be recovering like $300. We have no savings of any kind or retirement - haha we used it all trying to pay on these bastard student loans since 2003 with their ridiculous variable monthly payments. I don't know what the father owns but I'm pretty sure he's not too far off from broke either. Again, thanks for all your help everybody!

[KeithDoxen]

OP: My experience with creditors is that there's simply no way to predict whether or not they'll sue, and if so, when they will sue. There's pretty much no formula one can use to figure it out. It's just the luck of the draw. If you have to default you have to default. As is often said around here, you can't bleed a stone. And if they do sue and get a judgment, try to live without a bank account. You can use one of those WalMart money cards. I think you can even have your paycheck deposited onto those cards now.

[gml120]

I thought of another question in my sleep last night. Can you do a chapter 13 to reorganize a judgement debt? I believe you can do a 13 three? years after a 7. Is it even a good idea?

[gml120]

Update: In the face of impending default the father decided that it would be in his best interest to pay on the loan. The issue will continue to exist where the current payments are just taking care of the loan's accruing interest, and not actually paying anything to principle but I guess a rock or a hard place would be more comfortable anyway at this point. I have to admit I was curious what would happen to a defaulted student loan over $50k but it looks like that is a battle for another day. Thank you all for your help and information again. LOVE this forum