Non-direct creditor trying to collect after discharge

[Bob Walker]

On our Ch 7, my wife had an old student loan that was actually owned by a private creditor not a financial institution or federally connected program. The debt was discharged in the BK, however it appears the creditor went back and got their money back from the other lenders, one saying they were the original creditor and a connected program.

Can this original creditor collect on the debt or if the last creditor who owned the debt was the one it discharged the debt, does that mean no one can collect on it?

Thanks

[Dst1]

On our Ch 7, my wife had an old student loan that was actually owned by a private creditor not a financial institution or federally connected program.

This is confusing. Either a loan is a student loan or it is not. It can't be both.

The debt was discharged in the BK, however it appears the creditor went back and got their money back from the other lenders, one saying they were the original creditor and a connected program.

I honestly don't understand what all this means.


Let's go back to the beginning. Was this ever a student loan? If you are unclear if it was a student loan see my recent post "What is a student loan anyway" in the student loan forum.

If it was never a student loan then the OC is out of luck. If it was a student loan then it depends on what happened.

[music12]

also, how do you know it is actually discharged? if it's a student loan, then it wasn't discharged.

[me90210]

My guess is a Private loan used for school? Then it's not technically a student loan.

What he's saying is that, for example.. he went to Loan company A and secured the loan, well the loan was sold to company B. The debt was discharged from company B in the BK, but then company B said no we want our money and went after Company A, now company A is coming after him.

[Bob Walker]

reply

My guess is a Private loan used for school? Then it's not technically a student loan.

What he's saying is that, for example.. he went to Loan company A and secured the loan, well the loan was sold to company B. The debt was discharged from company B in the BK, but then company B said no we want our money and went after Company A, now company A is coming after him.

Yes! I believe this is the best way to explain it. I researched the original creditor and it is a private corporation that funded the loan, not a government student loan program.

The loan was sold off to other creditors over the years and the last one that owned it was the one included in the bankruptcy. Just as 90210 states, it appears each one went back to the other to get their money back and now it has supposedly reached the original lender.

Whew! Sorry this was so confusing, but it's my wife's loan and not mine so I don't know the best way to describe the details.

One thing is for sure, the credit report shows the last creditor of the loan with a balance of $0, but a Derogatory Account for the whole amount, then another derog for the current alleged original creditor for the same amount.

I've already contacted the Trustee so I hope to hear from him soon. I've also researched what is called an Order of Clarification to get from the Judge in our case to settle once and for all who owned this debt at the time of BK and if it was discharged in the bankruptcy.

If you have any further insight to help on this matter, I'll be happy to answer any question to further clarify what is going on the best way I can determine it.

Thanks

[Dst1]

Yes! I believe this is the best way to explain it. I researched the original creditor and it is a private corporation that funded the loan, not a government student loan program.

That fact is irrelevant. A private corporation can indeed fund a student loan.

You need read the post and I talked about in my first post in this thread and determine if it was in fact a student loan or not.

If it was not a student loan then it was successfully discharged.
If it was a student loan then the discharge was in error. It doesn't matter that the loan had been sold.

[Bob Walker]

Company A - F

also, how do you know it is actually discharged? if it's a student loan, then it wasn't discharged.

I think that's the issue at hand is what kind of student loan is it. It appears to me that it is a private firm that guaranteed the loan, not a federal program. The private company (Company A) sold it to Company B, who then sold it to Company C, who then sold it to Company D. Company D, the last known holder of the debt, was the one included in the BK.

What appears to be happening is one of two things:

Company D, seeing how they weren't going to get their money, sold it to Company E who then sold it to Company F which is trying to collect the debt.

OR

Company D, still wanting their money, went back to get it from Company C, who then went back to Company B, who then went back to Company A.

What is undetermined at this point is if Company A and Company F are the same, it's just a matter of determining which route this loan took at the time of the bankruptcy.

I hope this explains a little better what is going on.

Thanks

[Bob Walker]

That fact is irrelevant. A private corporation can indeed fund a student loan.

You need read the post and I talked about in my first post in this thread and determine if it was in fact a student loan or not.

If it was not a student loan then it was successfully discharged.
If it was a student loan then the discharge was in error. It doesn't matter that the loan had been sold.

OK, I read it. What it sounds like we need is the Order of Clarification from the Judge. The ORDER says all debts are discharged, but the creditor is not accepting it.

[Dst1]

OK, I read it. What it sounds like we need is the Order of Clarification from the Judge. The ORDER says all debts are discharged, but the creditor is not accepting it.

After reading that post is it a student loan or not? Whether it is or not makes a difference in terms of what your next step should be. In either case I don't think an order of clarification is going to help you much.

[pcn]

As a side note, all student loans do not automatically fall into a "non-dischargeable" category. Privately funded student loans are affected by a "qualified higher education expenses" test to determine how much of them, if any is "dischargeable".

[Dst1]

As a side note, all student loans do not automatically fall into a "non-dischargeable" category. Privately funded student loans are affected by a "qualified higher education expenses" test to determine how much of them, if any is "dischargeable".

And in all my life I have only read about two cases that meet that criteria. A good link that covers this is here:

On a side note, when you step out of your house today you might get hit by lightening. Or win the jackpot on Powerball. That's how likely you are to get you SL discharged under that test.

[pcn]

There is also the "undue hardship" area. I don't claim to be an expert, nor do I act like one. I'm simply pointing out that there is no such thing as a blanket "no student loans are ever dischargeable" statement. Exceptions do exist, and may apply. To ignore them is foolish.

[Bob Walker]

Result

Well it sounds like this isn't so cut and dry and the Order of Clarification would certainly put an end to the argument. Without it, both parties would simply go back and forth with one side saying it is and the other saying it isn't.

I can't even get a consensus here because the verbiage I continue to see is "generally student loans are not dischargeable". So that must mean certain ones are and it's a matter of determination by the Judge if this one is or not.

I'll let you know what I find out, but thank you to everyone who has offered insight into this issue.

Bob

[Dst1]

Well it sounds like this isn't so cut and dry and the Order of Clarification would certainly put an end to the argument. Without it, both parties would simply go back and forth with one side saying it is and the other saying it isn't.

I don't know the rules in your state but in most cases an order of clarification cannot have retroactive affect. Since your case has been discharged it doesn't help you.

If you believe that it is not a student loan then the correct thing to do is to send a cease and desist letter to the creditor. They then are required by law to stop contacting you. Let them sue you if they think the student loan has been discharged in error.

[music12]

i partly agree and partly disagree with dst1. there is a discharge order, but there is a dispute as to what it means as to the student loans. an order by a judge will resolve the dispute one way or the other. such an order will interpret the discharge as it was at the time it was entered - it's not a matter of changing something retroactively, just understanding what happened.

that was the part i disagree with dst1 about. the part i agree with is, i think it's a good idea to do what he suggests, that is, take the position that it was discharged and send them the letter as he says. then if they do want to pursue it, it should be up to them to go to a judge and have it clarified. that is, the burden of doing that doesn't have to fall on your shoulders.

on the other hand, doing it this way may end up delaying getting a clear answer, which could add stress to life. also, there may be things i'm not thinking of that your lawyer would know about.