CitiBank Private Student Loan & Ch 7

[jbr12]

I got a strange call from a debt collector 2 days ago (58 days into my 60 objection period). I informed the collector that any debts I owed was included in my bankruptcy case and she should call my lawyer with any questions.

She then informed me that she was calling in regard to on of my CitiBank Private Student Loan accounts. I told her that all of my student loans are on deferment because I am a full time masters student. She said that there is a clause in my loan agreement that if I file for bankruptcy, the full amount comes due and since it is a student loan, it is not dischargable. Has anyone else heard of anything like THIS?!?!?! Its mind boggling! I had a clean payment history with all of my student loans in the past. I can't log into my student loan account since its now in a collection status. I never received any statements or bills or anything on the account, so this really hit me out of no where. Now I have to wait until Monday to call CitiBank and see what in the world is going on...

[jbr12]

Nobody has experience with CitiBank Student Loans??

[jdmc1973]

I only have federally guaranteed student loans, i.e. not dischargeable. Mine are through Sallie Mae and I can't access my loans until after discharge, but they're in deferment right now. If the Citibank loans were not federally guaranteed I would think they would be discharged. If they were guaranteed, then I've never heard of them demanding full payment for filing bankruptcy, maybe someone on here has experience with them and student loans.

[jbr12]

Thats the thing... they are NOT federally guaranteed loans, but I have heard that any loan with a STUDENT LOAN tag (CitiAssist Loans, Aspire, etc) are still not dischargable. This is the same line the debt collector fed me when I told her about my bankruptcy discharge...

[jdmc1973]

I found this info at http://www.finaid.org/questions/bankruptcy.phtml

http://www.finaid.org/questions/bankruptcylimitations.pdf

Hope this helps....If you're still not sure, then maybe your lawyer could provide some insight on the loans.

Discharging Student Loans Through Bankruptcy

Can educational loans, such as the Federal Stafford, Federal PLUS, and private loans, be discharged through bankruptcy?

Section 523(a)(8) of the US Bankruptcy Code, at 11 U.S.C., excepts from discharge debts for "an educational benefit overpayment or loan made, insured, or guaranteed by a governmental unit, or made under any program funded in whole or in part by a governmental unit or nonprofit institution; or an obligation to repay funds received as an educational benefit, scholarship, or stipend; or any other educational loan that is a qualified education loan, as defined in section 221(d)(1) of the Internal Revenue Code of 1986, incurred by a debtor who is an individual" unless "excepting such debt from discharge under this paragraph would impose an undue hardship on the debtor and the debtor's dependents".

For the purpose of this paragraph, the definition of of a qualifying education loan includes loans made solely to pay the higher education expenses of an eligible student, where the student is either the debtor, the spouse of the debtor, or the dependent of the debtor. In addition, the loans must be for study at a school that is eligible to participate in Title IV programs and where the student is enrolled at least half time. Loans that don't meet this definition, such as credit card debt, are still dischargeable even if they were used to pay for higher education expenses.

Thus FFELP and FDSLP loans, and education loans funded or guaranteed by private nonprofit organizations, are automatically nondischargeable in a bankruptcy proceeding. The only cases in which they can be discharged through bankruptcy are:

if the borrower files an undue hardship petition
and then it is up to the judge to decide whether the loan can actually be discharged. (The Higher Education Amendments of 1998 repealed the provision that allowed for the discharge of education loans that had been in repayment for 7 years. This affects all bankruptcy proceedings initiated after October 7, 1998, regardless of whether they involve loans incurred before that date.)

[Knew_it_all]

She said that there is a clause in my loan agreement that if I file for bankruptcy, the full amount comes due and since it is a student loan, it is not dischargable.

Ah, why don't you just look at your loan agreement?? It is very possible that if you go into default the loan does become due and payable...If you don't have a copy, ask Citi Bank to provide one to you......BTW, full amount due and payable on default is pretty much standard language in most loan contracts..

[jbr12]

Ah, why don't you just look at your loan agreement?? It is very possible that if you go into default the loan does become due and payable...If you don't have a copy, ask Citi Bank to provide one to you......BTW, full amount due and payable on default is pretty much standard language in most loan contracts..

Thats the thing tho.... I never defaulted on the loan. I still haven't dug through my files to find my original agreement and I can't access my online account now because of the collection happening. All of my federally funded student loans are fine. Its just these 2 stupid private student loans that went in to collection mode the day I filed AND they had collection agents coming after me during the entire bankruptcy process

[PaKettle]

Whatever you do, I would not pay it until consulting with someone who clearly knows whether you can discharge it or if they are within their rights to ask for full payment.

I'd start by finding out for SURE whether or not it's dischargeable. I thought that if it was a private loan it was dischargeable.

If it's not dischargeable, still you are not in default because as you noted, they suspend bills during bankruptcy. At least my DOE one did that and that is what I have heard is standard practice. Something seems wrong about this, so maybe get several opinions - somewhere.

[danaf]

I know everyone says these private student loans aren't dischargable and I've read the info myself however - then these companies turn around and pull a stunt like this....something has got to be done. If they want to be treated like student loans, then they should act like a student loan.

[jbr12]

danaf- You'll notice in the Bankruptcy News area of the site there is a bill being formed in the government to force private loans to do just that: act like a real student loan or be dischargable. The protection that this private student loans offer to banks makes the loan a non-risk and they charge interests rates much higher than standard student loan rates...