My Co-Signer Went Bankrupt and NCO Financial is Collecting on My Student Loan

“Dear Steve,

My private student loan defaulted because my co-signer filed for Chapter 13. It was in good standing as of 20 days ago and now it’s in collections with NCO Financial Systems overnight. Lender bounces me off to Collections. If I talk to them they have an assigned agent to my case who states that this is still in the beginning of the collections process and my only option if I don’t want to hurt my credit is to settle. He wanted to borrow from friends and family at least 25k. I told him, that this is impractical and told him the only thing I can do is just to pay this off aggressively.

I think I was being naive here. Collections is the lowest one can fall, can they do more damage? Should I have negotiated? Af friend’s attorney said I shouldn’t have even made that first payment with Collections. (They pushed for a payment that day) I just want my acct back with the lender and pay them as I have been. Is dealing with collections my only choice? Please advise. Thank you


Dear Eve,

Well what we have here is a mystery.

It is unclear why the loan would be late if you had made all of your payments on time. Were you making the payments or the co-signer?

If the payments were being made by the co-signer were they the primary borrower? If so I can see how a notification they included the loan in a chapter 13 bankruptcy would screw up the works because once the private lender is notified it triggers a process that begins with a notation the loan was included in bankruptcy.

In that case the private lender would think the loan was now in default and no more payments would be expected because the lender would not be able to solicit payments on the loans included in the bankruptcy.

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So here is the really odd part of your statement. Since no more payments would be able to be solicited for the accounts listed in bankruptcy, why are they soliciting payments?

One possibility is you may have more than one loan and it is another loan that is in default. I don’t have enough information to even guess how many loans you might have.

Do You Have a Question You'd Like Help With? Contact Debt Coach Damon Day. Click here to reach Damon.

Frankly I would not be worried about NCO servicing your loan as long as you are getting statements or have access online to a portal that shows your payments and balance. NCO Financial is a national collections agency who does sometimes make a mistake but for the most part they do process a ton of payments accurately and professionally.

I understand what the attorney was saying. By making the payment you acknowledged the debt and skipped past a step of asking for verification of the debt. But it does not sound like you dispute the debt is yours or that you owe it.

If the private lender has assigned it out to a collection agency as their agent to service the loan there really is no downside to working closely with NCO on an acceptable payment arrangement.

But the situation still remains a bit of a mystery based on the information you’ve provided. There seems to be more to the story.

If you need more help to figure out your options for student loan repayment, see The Ultimate Guide to Dealing With Student Loans You Can’t Afford.

Please post your responses and follow-up messages to me on this in the comments section below.

Damon Day - Pro Debt Coach

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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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