I defaulted on my Navient/Sallie Mae private student loan and I just found out that they have closed the account and charged it off as bad debt as listed on my credit report.
My private student loan was closed and charged off. I’m assuming they have turned it over to a collection agency, but I haven’t heard anything yet. If they did turn it over to a collection agency, what are the chances that I would be sued and my wages garnished? What can I do/what should I do if/when I’m contacted by the debt collector? I can’t afford to pay the loan or I would have continued making payments. I rode it out with Navient until they closed/charged it off so, should I ride it out with the debt collector until the statute of limitations is up?
What you decide to do has to be a decision you make after weighing your options.
Keep in mind that just because a debt is “charged off” does not mean it’s not collectible. You should watch your mailbox for a 1099 form if the debt is reported as a bad debt. If the amount is for more than $600 you may owe personal income tax on the forgiven amount above the point you are insolvent. Talk to your tax professional about this.
Also keep in mind the Statute of Limitations (SOL) does not prevent you from being sued or a collector going after you to get you to admit to the debt or make a payment on it. If you are sued on a debt outside the SOL you would have to raise that fact as a defense to the suit.
The only way to absolutely know if a debt is outside the SOL would be to get a legal opinion from an attorney who is licensed in your state. Many factors can cause a debt to be extended past a flat time. Every situation is different.
All of that being said, waiting to see if you are sued is a strategy. You could then deal with it at that time, including settling the debt for less than you owe.
At this point you might want to enroll in a three bureau credit report monitoring service to be notified if the debt reappears on your credit report. It’s not unheard of for a collector to report the old debt with a new date to get it to pop back on your credit report.
As far as the odds of you being sued, nobody can ever know that. Creditors and debt buyers have changing strategies of when to pursue a debt. If you wanted an absolute percentage all I can offer is 50-50. Either you will or won’t be. But frankly I would not spend time worrying about it. If you are sued you should talk to a knowledgeable student loan attorney. Here is my list of smart student loan attorneys.