Here is an interesting development with student loans held by the Coronado Student Loan Trust.
In December 2018 a consumer filed an Adversary Proceeding to attempt to have their private student loans forgiven. See filing here.
The debtor stated they owed $132,652 and future payments would create an undue hardship so the loans should be discharged in bankruptcy.
The original complaint said, “Excepting the student loan from Discharge will, when Debtor is unable to make the payments required by the Defendants, cause the Debtor to default on his government student loans, and subject him to collection activities, possibly including, but not limited to: lawsuits; wage garnishment; ruined credit; collection calls & letters; tax refund intercept; substantial additional fees & interest added to the balance. Debtor is being forced into a situation where default on his student loan is not just likely, but all but guaranteed, will serve to frustrate the “fresh start” of his Bankruptcy Discharge, and, as such, undermine the entire purpose of the Bankruptcy process.”
In subsequent filings, it was made clear the private student loans held by Coronado Student Loan Trust were being serviced by American Education Services (AES).
The student loans were eventually discharged by default because the creditor did not respond.
As I mentioned in this post the case opens the possibility of poor or lacking documentation to validate the ownership of the student loans.
Now, Coronado Student Loan Trust wants the default judgment tossed and asks for a different approach.
Recent court documents say, “A. Coronado seeks to vacate the Default Judgment in order enter into an Agreed Consent to Judgment to formally discharge the student loan(s).
Coronado’s sole purpose in vacating the Default Judgment is to enter into an Agreed Consent to Judgment whereby the Plaintiffs Hugh and Tammy Brooks and Defendant Coronado agree that Coronado Student Loan Trust 2018-3 PSL SLX has no objection to the discharge of its student loan debts in the underlying Bankruptcy Case 09-02012-JMC.
I am NOT an attorney so I have no idea of the legal advantage or disadvantage for having the default judgment set aside but at the very least now we know a bit more about the exact identity of this little known pool of private student loans.
Not the End of the Story
Another court filing by a different consumer on May 6, 2019, provides some additional information on what will probably wind up being known as the Coronado Mess.
But what is more interesting to me is the information alleged about Coronado Student Loan Trust. The suit filed says: “CORONADO STUDENT LOAN TRUST is a Delaware statutory trust and can be served through its agent at Wilmington Savings Fund Society, 500 Delaware Avenue, 11th Floor Wilmington, DE 19801.
On September 10, 2007, Coronado Student Loan Trust’s (“CLT”) predecessor-in-interest originated a loan in the amount of $21,503.48, which was subsequently assigned to CLT (“Ninth Loan” or “CLT Loan”).
Plaintiffs previously litigated and settled their outstanding balances on all of the Private Loans, except the CLT Loan, with Navient and NCT (the “Settled Loans”). During the course of discovery, Plaintiff learned that the CLT Loan had been assigned to a non-party, Coronado Student Loan Trust.” – Source
Given the fact, the Coronado Student Loans may be unable to be legally validated when it comes to origination and ownership, and the desire for Coronado to agree to the requested discharge, anyone holding a Coronado Student Loan should talk to an informed attorney if they file bankruptcy or are struggling to make payments on these loans.
And when you are talking to the attorney, be sure to mention the qualified education loan issue. If the loans are found to not be qualified education loans they would not be protected from bankruptcy.