AES private student loan going into default as soon as discharge is issued.

[finishline]

This is my first time posting here but I have been a lurker for a few years.

My husband and I have been in chapter 13 bankruptcy since 4/2007. We are waiting right now for a discharge. We should've gotten it by this time, but when trustee did final audit, he discovered we were short by one payment. This all thanks to my husband's former employer, UGH. Anyway, today we decided to call about our student loans to see when they would go into repayment. I have one (federal) and my husband has a federal and two private student loans. When we called AES about one of his private loans, he was told that his loan had been transferred to First MarbleHead Edu. Services and that as soon as the discharge was issued, it would immediately be sent/ sold to a third party collection agency and be considered defaulted.

We were really excited about starting over with a fresh start. It's really upsetting to know that we're already in the whole taking our first foot forward. I just don't understand it and frankly, I am distraught.

Anyone have any experience with this and any advice that you could offer. Thanks. I wanted to celebrate the end of this chapter 13 journey, but now I am feeling all the emotions I felt when we first started.

Thanks.

[HHM]

I wish there was something I could tell you. Unfortunately, there aren't really many options here (a polite way of saying, no options).

Private student loans are the last remaining, wild-west type loan. They can do pretty much anything they want. Sadly.

Best bet is to get in touch with First Marble Head and if you can work something out.

[KeithDoxen]

This situation is one of the things that brought me to this website a few years ago. My Ch 7 was discharged in 2009 and my private student loan was immediately defaulted and sent to a collections agency. Note that it wasn't "sold" to a collections agency. This is very important. That means that the original creditor still owns the debt, but that a collections agency is doing the dirty work and trying to collect it from the debtor.

If it makes you feel any better, since there's not much creditors can take from a bankrupt individual, private student loan creditors will often make a half hearted attempt at collection for quite some time. Instead of going right to a lawsuit, they will often call you several times a week and generally be annoying, but stop short of doing anything serious to take your wages or assets. My private student loan has been in default for almost three years and I haven't been sued yet.

I have a friend who was able to settle his own defaulted private student loan for about half the original balance. It used to be very rare that student loan creditors would settle debts but in this economy they are now just happy to be able to get something out of the defaulted debtors. You may want to try to negotiate a settlement.

[finishline]

This situation is one of the things that brought me to this website a few years ago. My Ch 7 was discharged in 2009 and my private student loan was immediately defaulted and sent to a collections agency. Note that it wasn't "sold" to a collections agency. This is very important. That means that the original creditor still owns the debt, but that a collections agency is doing the dirty work and trying to collect it from the debtor.

If it makes you feel any better, since there's not much creditors can take from a bankrupt individual, private student loan creditors will often make a half hearted attempt at collection for quite some time. Instead of going right to a lawsuit, they will often call you several times a week and generally be annoying, but stop short of doing anything serious to take your wages or assets. My private student loan has been in default for almost three years and I haven't been sued yet.

I have a friend who was able to settle his own defaulted private student loan for about half the original balance. It used to be very rare that student loan creditors would settle debts but in this economy they are now just happy to be able to get something out of the defaulted debtors. You may want to try to negotiate a settlement.

Thank you for this suggestion. We will try whatever we can to bring it current, if that's even possible. Are they willing at all to make payment arrangements with you? Our plan has always been to pay this loan along with the others but we don't want to be sued or have wages garnished. Will they try these things even though we are paying them? Will they hassle us even though we set something up with them? Is it true that once your loan is reported to credit bureaus as "defaulted", it will stay there until 7 years after it's paid in full? Sorry to be firing all of these questions, we just want to know what to expect. Also our car is on it's last legs, we've managed to make it go for the last 5 years- while in this bankruptcy and we were hoping to buy a newer used car after the discharge. Now, I am afraid we won't be able to as our credit is never going to recover. This is so depressing. I almost don't even want the discharge now.

[KeithDoxen]

Are they willing at all to make payment arrangements with you? Our plan has always been to pay this loan along with the others but we don't want to be sued or have wages garnished. Will they try these things even though we are paying them? Will they hassle us even though we set something up with them? Is it true that once your loan is reported to credit bureaus as "defaulted", it will stay there until 7 years after it's paid in full?

The answer to all your questions is "maybe." It's within their rights to sue you, get a judgment, and pursue collection in various ways. Their willingness to set up a payment plan, etc, depends on so many variables it's impossible to predict. At this point you should probably talk to them about it and see where things end up. Good luck.

[gml120]

I have first hand knowledge with exactly your situation. My loan was with KeyBank. It auto-defaulted upon my discharge. They immediately went after the cosigner. I tried to beg and plead and be polite, then get angry with them over trying to bring the loan current for almost 4 months. (The loan was current with payments up to and through the bk for 7 years before the discharge.) I had no luck whatsoever. After these guys write it off, from my experience it's default and they will never ever let you bring it back to a good status. They will also report to the bureaus every month or ever other month that the loan is in collections / charged off / or something similiar. They will also add ludicrous "collections fees" etc. which in my case was 20% of the principal. In short my 15k loan suddenly jumped to 25k in 6 weeks. This is also important to remember: once the loan is defaulted you CANNOT view your account online anymore. You can't see the intrest rate, balance, payment history...nothing. Print out everything you can before it defaults! Also, after it defaults, they loan company will try to get you to make payments on it, claiming that this will benefit you in some way. Here's the truth - if you make payments, it won't show up on your credit report in any way whatsoever. The only way this thing is rectified is if you pay the whole balance or settle for a lesser than full balance and even IF you can magically pull the entire balance out of thin air it will STILL show on your credit report that there was a loan defaulted for 7 years but at least it won't be in current chargeoff. Something like 50 or 100 bucks a month does Nothing - your report will read the same if you pay 1000 a month or 0. All it "might" do is keep them from suing you. But what is definitely does is reset the statute of limitations on your loan extending the time available for them to sue you. Find out what your state's sol is - if you think you won't acrue anything worth anything in that amount of time don't give these bastards a dime. OR, if you still have some credit before you file, take out ANY other loan and pay them off for as little as possible so you can include the new loan in your bk. It's a sad truth but this type of student loan is lose-lose for the consumer right now, you really have no good options. Feel free to private message me if you have any other questions about this that you don't want to post on this forum - I truly fought KeyBank for a total of 14 months over this exact issue and a few things still aren't resolved that my lawyer is now handling. Good luck with this - these private student loans are a real headache.

[pamkev]

This thread has caught my eye, I have a parent plus loan though AES and are current with them. Planning on filing a chapter 7 next month so if I'm reading this right even though if I pay them though the bk or can't for two months or three months I will be in default after everything is discharged. That is crazy.

Pam

[gml120]

Are parent plus loans federal or private? If they are federal you should have no problems except for a wait for them to file all your bk information before they start sending you a bill again. If they are private it's likely they will default them.

[HHM]

Parent Plus are federal.

[pamkev]

Yes my loans are Federal Thank you for the info

[Lilyat108x]

My loans are federal and AES has allowed me to enter a 9 month repayment plan to bring them out of default. After that, the loans will reflect as current on my credit report. They offered a settlement too but I could not pay the large amount they were asking. AES used to call my family before my ch 7 bk. They even called my 16 year old several times while she was in class knowing it was her phone! I have no idea how they got her number!

[finishline]

My loans are federal and AES has allowed me to enter a 9 month repayment plan to bring them out of default. After that, the loans will reflect as current on my credit report. They offered a settlement too but I could not pay the large amount they were asking. AES used to call my family before my ch 7 bk. They even called my 16 year old several times while she was in class knowing it was her phone! I have no idea how they got her number!

My husband's loan is a private student loan and I think they are going to be ruthless. His dad's is a co-signer on this loan and their relationship is already broken. I'm such a mess about this and I can't believe there is nothing we can do.