Quick Answer: Private student loan bankruptcy can help when borrowers challenge debt validity through statute of limitations defenses and document fraud claims. This 58-year-old veterinarian faced collection lawsuits after 2010 bankruptcy discharge but discovered forged signatures and illegible loan documentation that may invalidate the $16,000+ debt.
Question:
Dear Steve,
At 58 yrs old I went back to school, attended St George’s University school of Veterinary Medicine 2002-2006, 16 private loans, filed bankruptcy 10/2009, discharged in 1/4/2010. Did not know about adversary proceeding at the time.
Each weekday I send one short email: one money story that caught my attention, why it might matter to you, and one manageable thing you can do with it. A couple of minutes, and a dad joke.
In the latest issue (Oct 16): The check that looks like a scam may be real
Free. I sell nothing. Unsubscribe any time.
Currently, I have a civil suit against me to collect on debt. They filed the suit just two weeks before the statute of limitations. Although, I am disputing that because they are only stating when the last payment was made and I have not seen any real proof (i.e.. cancelled check)
The Daily Money Brief — Free, at 10 AM
Money you may be owed, scams to dodge, and the fine print decoded — the consumer money news that affects your wallet, every weekday.
I believe the last payment was a month earlier and therefore past the statute of limitations. There are also many discrepancies on the loan applications. When I asked for validation of the loans I received copies of copies where the second page is a separate sheet that is illegible.
There were Truth in Lending Disclosures that clearly state amounts for the loans, interest rates and terms but I never received them at the time and three of those do cuments have my signature forged. the rest have no signatures. Don’t get me wrong…I took out loans to attend school, I am not working as a vet and am considered a “Foreign Graduate”. I was laid off work after only 1.5 yrs working as a vet. Then moved to New Mexico to care for my mother who had dementia.
After that long a time I felt incapable and in fact am unable to be licensed in New Mexico. Bankruptcy was supposed to be a fresh start. I have remained debt free with the exception of this huge private student loan debt that has followed me.
I thought I had a good case for an adversary proceeding in that the school was not Title IV eligible and therefore I was not an eligible student and these were not “qualified educational loans”.
These were private loans funded by Richland State Bank. However, I read a recent case in Alaska where the student also attended St George’s Vet school, same loans same bank, In that case the Plaintiff made a case that the loans may have been funded by Richland State Bank but it was under a “non-profit” program which purchased the loans from Richland State Bank. Therefore the loans are not dischargeable. It is a real scam.
These guys have at least 25 “non-profit” Corp. that deal in 2nd market student loans. All the same President and CFO. Any suggestions on how to approach this? I was happy to make a donation. Thank you for helping our four legged friends.
Pat
Answer:
Dear Pat,
All of the advice I’m about to give you is a mixture of opinions and ideas. Because this field is so fluid I would suggest you find an attorney who is well versed in dealing with student loan issues and consult with them for a legal opinion in your state. Here is my list of student loan attorneys.
Just because one person received a certain outcome does not mean your outcome will be the same with a different approach and set of circumstances.
First off, I have a recollection that TERI loans from before their bankruptcy in 2008 are technically no longer protected in bankruptcy because of the TERI bankruptcy and using that a non-profit guaranteed the loan would be moot.
Attorney Nathan DeLadurantey offered this advice give the fact the loans may have technically been discharged in your previous bankruptcy, “If they’re not qualified educational loans, aren’t they automatically discharged? Which means he wouldn’t need an Adversary Proceeding to make that determination. That’s at least the route I’d argue in the context of the civil case. Most collection lawyers probably haven’t thought of that issue. Plus, she should file a counter-claim for a violation of the bankruptcy discharge injunction (and an FDCPA violation as to the collection lawyer (and debt buyer if there is one) and any related state law causes of action for an illegal collection lawsuit).”
That’s some great advice.
Here is what William Fossey, a law professor, said, “There is a case out of New York that might be helpful: Decena v. Citizens Bank, 549 B.R. 11 (Bankr. E.D.N.Y. 2016). In that case, Citizens Bank sued a woman who borrowed money from the bank to attend medical school in Africa. After she graduated, she was unable to practice medicine in at least some of the states in the U.S.; and her school was not on DOE’s approved schools list. A New York federal court ruled that the loans were not covered by the undue hardship provision of the Bankruptcy Code because the medical school was not on DOE’s approved schools list. So this individual needs to determine if the veterinary school was on DOE’s approved schools list at the time he or she was enrolled. If not, the Decena reasoning might be applicable.”
More good information.
Greg Fitzgerald, a lawyer in California said, “She needs a lawyer to have the best chance for success.” I totally agree. Expert advice by a knowledgeable professional is going to be critical. He went on to suggest that you try dealing with the civil case first because you would be eligible to file bankruptcy again and try for a discharge with an Adversary Proceeding. Things have evolved a lot since you last filed.
Attorney Austin Smith said, “There is an issue regarding non-profit guarantees, but in my experience, the lender can never prove the TERI guarantee exists. There is a good case on point, called Clouser, where the judge refused to accept there was a TERI guarantee simply because it said so in the promissory note. As for whether all TERI guarantees are invalid now that they filed bankruptcy, I haven’t been able to get to the bottom of that.”
So there you go, some different opinions but hope nonetheless.
Before You Sign Anything: Run any debt relief contract through the free Contract Decoder to spot hidden fees and unfair terms. Check the company’s complaint history with the Scam-O-Meter.
Compare Your Real Options: Most debt relief companies won’t tell you about all your options — especially the ones they can’t profit from. Credit counseling has a 21-27% completion rate. Settlement resolves about 1% of enrolled debts fully. Bankruptcy has a 95% discharge rate — and protects your retirement. Take the Find Your Path quiz for a recommendation based on your actual numbers.
I agree, they should have been discharged in the 2010 bankruptcy because they were technically not educational loans because they were not a DOE eligible school. The school did not receive that until 2010. So, there was definitely a before and after, ineligible/eligible.
Here is the part of the tax code that I am concerned about and what they used in the Alaska case.
11 U.S. Code § 523 – Exceptions to discharge
“(8) unless excepting such debt from discharge under this paragraph would impose an undue hardship on the debtor and the debtor’s dependents, for—
(A)
(i) 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”
So they say that even though the loans were funded by Richland bank they were bought by Brazos higher education (or one of their 25 or so other “non-profit” corp.) as part of a “student loan program”.
Thank you for all the input.
Question asked.