Qualified Student Loans – Law Office of Rick Morin, PC

I help clients with substantial student loan debt all of the time. Of course, there is nothing wrong with student loans. Financing a reasonably priced good education is a smart life decision. However, what happens when a person defaults on their student loans? And who is the National College Student Loan Trust? Read on to learn more.

Student Loan Debt Default

If a borrower stops paying for their student loans, it is said that the borrower “defaults” on the debt. When a borrower defaults on a debt, the creditor can take legal action against the borrower.

In some cases, a student loan creditor can intercept tax refunds. Or in other cases, the lender will file a lawsuit agains the borrower in state court. If the lender obtains a judgment in court, the lender can garnish wages, place liens on property, and even levy money directly out of bank accounts. This is all true for student loan accounts.

However, as the New York Times recently pointed out, not all student loan debt lawsuits are valid.

Who is the National College Student Loan Trust?

The National College Student Loan Trust is one of the largest owners of student loan debts in the country. Most borrowers have never heard of them before until they run into trouble with their student loans.

As the true owner of the debt, the National College Student Loan Trust should be the party with the authority to actually file a lawsuit against the borrower. The New York Times pointed out that the National College Student Loan Trust has run into significant trouble proving that they actually own some student loan debt.

This gives borrowers an opportunity to contest these student loan lawsuits. Only the true owner of the debt has the ability to file a lawsuit against a borrower. If the plaintiff in a lawsuit cannot establish their ownership interest over the account, they cannot win the lawsuit. That is, if the borrower fights back in court.

What to do if you are sued by the National College Student Loan Trust

If you are sued by the National College Student Loan Trust, don’t panic. As discussed above, you may have some valid defenses against the lawsuit. However, it is important that you take action fast. Most borrowers do not even appear in court in these lawsuits. This means that the lender can win the case automatically.

You should contact a lawyer immediately if you are served with a debt lawsuit. If you wait too long, you will forever lose your right to defend yourself in court.

Educational Loans are Tough to Discharge in Bankruptcy

The general rule that most people know is that student loans typically survive a bankruptcy. In other worse, loans used for education are not dischargeable in bankruptcy proceedings.

This probably makes sense. Everyone would go run up large educational debts and immediately declare bankruptcy after graduation. This is not sound public policy.

However, current rules make it incredibly difficult to discharge student loans in bankruptcy. But there is still hope!

Partial Discharge of Student Loans is Possible in Bankruptcy

The good news is that student loan discharge in bankruptcy is not an “all or nothing” proposition. A good bankruptcy attorney will carefully analyze the dischargeability of student loans. It is not all black-and-white.

Let’s use the following example: a debtor takes out $15,000 in student loans per year of college. However, tuition only cost $10,000 per year. The remaining $5,000 per year was used for living expenses. Over for years of college, the student loans total $60,000 — $20,000 of which was not used for the “cost of attendance.”

This is really important! The debt incurred for “cost of attendance” is not dischargeable, but the rest is! In our scenario above, that means that $20,000 of the $60,000 can be discharged in bankruptcy. Even though a total discharge of the educational loans is not possible, a 1/3 discount is still an amazing outcome.

Nothing is Automatic When it Comes to Educational Loans and Bankruptcy

In the scenario above, the bankrutpcy court can discharge 1/3 of the educational loans. However, nothing happens automatically.

A bankruptcy filer must take additional steps in order to qualify for even a partial student loan discharge. This complicated process is known as an “adversary proceeding.”

A good bankruptcy attorney will aggressively prosecute an adversary proceeding for you. Make sure that you ask your bankruptcy attorney about partial student loan discharges in bankruptcy.

My office helps student loan borrowers obtain discharges of student loans in bankruptcies. Please call my office at (916) 333-2222 to schedule a consultation today!

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National College Student Loan Trust Lawsuit