Statute of Limitations

Why Haven’t My Parents Been Contacted Over the Defaulted Private Student Loans

Written by Steve Rhode


Dear Steve,

Our situation is a little complex, so please bear with me as I try to explain.

My parents who currently reside in MD are legally responsible for a large, defaulted private loan that was originally in my ex-wife’s name many years ago when we lived in Rhode Island. In the early 2000’s, when we were married, we borrowed quite a bit of money when she was in school and I was temporarily unemployed. We borrowed from Education Finance Partners, based out of CA. My parents cosigned since my credit had deteriorated. When we divorced, we mutually agreed that I would take responsibility for the majority of loans, so I contacted the loan servicer (ACS) and requested that my ex-wife’s name be removed from most of the loans, thus leaving my parents as the primary responsible party. Various loans were then consolidated into one single loan of over $100,000.

Over the years, I made hefty payments (<$1,400/month) until around 4-5 years ago when my job situation became unstable and I decided to relocate to NY State. We had fallen so far behind, the loan eventually went into default 3 years ago. Per permission from my parents, I was their representative and handled all communications with ACS as we tried to make payment arrangements before the loan officially defaulted. Since the default 3 years ago, interestingly enough, no one has contacted us regarding this loan either by phone or mail. I was waiting for a collections agency to contact me so I could try to work out an arrangement. But as one year went by then another, I was told by an attorney friend of mine (who is not a debt attorney), that we might as well wait to see if the Statutes of Limitations would come into play, and then at least we couldn't be sued. Of course the debt still remains, but interestingly enough, it hasn't affected my parents' credit yet. It shows up on my mother's credit report as a "charge-off, sent for collections" with $0 value shown. I have several questions that I hope that you might be able to help answer.

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I'm trying to reach out to lawyers but I haven't found any yet that will respond to my questions. At least I'd like to hear your thoughts on our situation, someone who knows more than me about debts. Here are my questions: 1) Which state's SOL would apply in this situation? My parents moved to MD around 6 years ago from RI. I have read conflicting statements about which state's statutes applies. Some people say that the state's statutes in which the responsible party currently resides would apply - based on research I've done, it looks like MD's SOL is 3 years. I've also read that the SOL in the state where the loan contract was made would apply, in this case RI where the SOL is 10 years. Also, maybe worth mentioning as I stated above, I became their representative and all correspondences were to me in NY State. 2) Why hasn't anyone contacted us? Since I was the point of contact (all contact info including address and phone numbers for the loan was my NY home), I expected that I would be contacted first. If the collection agency looked into my parents' credit reports, it shows that they currently reside in MD but no one has contacted them either. 3) Why aren't my parents' credit affected by this default? As I stated above, it is listed as a charge-off and $0. Thank you and I look forward to hearing from you. Eugene [text_include file="goog_middle_qa"] Answer:

Dear Eugene,

There are a few reasons why the loan has wandered away. One reason might be because the lender feels the loan is unenforceable for any number of reasons. One might be something I just published here.

Even if the loan is outside the Statute of Limitations a lender can still sue. You’d have to raise that issue as a defense to stop the suit.

One of the things I’ve learned over the years is the specific state that applies is not a clear answer and has to do with a lot of issues and technicalities. It really takes a legal opinion from a lawyer in your state. One place to look for a consumer attorney is here.

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Since you are located in New York you might want to contact Attorney Austin Smith in New York and discuss this issue.

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About the author

Steve Rhode

Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.

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