Question:
Dear Steve,
I currently have $95K in debt with NJClass loans which I’ve been working diligently to pay off. My mother, my cosigner on the loan, went through bankruptcy 2013-2018. During this time, the loans were put on a “stay” period, where payments were not due but interest still increased. I also was not contacted at all during this time by HESSA regarding the status of the loans. I was not aware the loan payments were put on pause while interest still increased.
The original amount of the loans should have been around $80k. By the time my mother’s bankruptcy was completed, the loans were nearly $127k. When I finally connected with HESSA in 2018, they said they were not allowed to contact us during the time of bankruptcy. I explained my frustration that my mother was the cosigner and that I should have been contacted/informed of the loan status regardless of her situation. Is this accurate?
I think it is unfair that I should have to pay back nearly $45k in interest on the loans due to HESSA’s lack of communication to it’s customers. I’m the main person on the loans and should have been contacted regarding the status of the loans during that period. If I was informed, I would have made an effort to make payments on the interest so that it did not grow to be so high. Now I am stuck with an incredible amount of debt that in my eyes is unjustified.
I do not come from a wealthy family. My mother is the only provider of 5 children, 2 of which she is trying to put through college now. My loan amounts are a huge burden and cause a great deal of stress and shame.
I am wondering if there is anything that can be done to decrease the debt? Or if the interest incurred during the bankruptcy period can be amended? Or if the debt could have been discharged during my mother’s bankruptcy? Is there a way to retroactively handle any of this?
Amanda
Answer:
Dear Amanda,
I’m sympathetic to your situation but there is a little issue here and that is all about how things really work.
Here are the basics as I understand them.
1. Your mother was a cosigner. So she is not and was not the primary account holder. You are. Any efforts by your mother did not change your full liability for this loan. Nor did it prevent you from making the payments even though there were no active collection efforts.
2. If your mother was not making payments, she actually had no obligation to make them outside of her bankruptcy since she was just the cosigner and not the primary account holder.
3. No creditor is required to contact you. A lack of communication does not change your ultimate liability for the debt. However, one issue that might lean in your favor is if a creditor does not contact you for a period of time larger than the Statute of Limitations (SOL). In that case, you could raise that as a defense if you are sued. But you must discuss this with an attorney that is licensed to practice law in your state to get a legal opinion. The SOL may be on hold during the time of the bankruptcy so it would not matter that much anyway.
4. While your mother did not make payments during her Chapter 13 bankruptcy, her bankruptcy did not stop interest from growing. As Nolo says, “keep in mind that interest will continue to accrue on your student loans during bankruptcy and you will still be required to pay them back after your case is closed.” – Source
5. Unless your mother received a ruling from the court that the student loans were discharged because of undue hardship, it is very likely she continues to be liable for the debts as a cosigner. As Nolo says, “The bankruptcy discharge applies only to the bankruptcy filer’s obligation to repay the debt. If the student you cosigned a loan with files for bankruptcy and discharges his or her obligation to repay the loan, you are still on the hook for the debt. Likewise, if you, as the cosigner, are able to discharge your obligation on the cosigned student loan, the student for whom you cosigned will still be on the hook for the debt.” – Source
I wish I had some better news for you. It seems like there were a lot of assumptions brewing here that were not based in reality.
Now, if you think you should get a fresh start and be able to file bankruptcy to get rid of your loan obligations, you can always visit Reset Button and have a consultation with an attorney regarding your specific case. As Reset Button says, “First, we review your financial situation and connect you with an attorney who can develop a plan to meet your specific needs. Next, we work with your attorney to implement that action plan. Finally, we provide resources to help you achieve your post-student loan financial goals.”
Facts are always better than fiction.
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