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Can I Punt This Student Loan Back to My Ex-Wife? – Gene

By on June 17, 2015

Question:

Dear Steve,

My parents are signer and co-signer for a huge private student loan over $100,000 which was used to cover expenses for my ex-wife over 10 years ago. We since divorced and as part of our divorce agreement, we divided liabilities on her student debt and removed her name from some of the loans (the loan company then allowed us to do this). So the end result was that a loan amount of >$100,000 was the sole responsibility of my parents; we agreed at that time that I would help with the monthly payments which exceeded $1,000/month.

Shortly thereafter, I had employment problems and was unable to contribute much to the payments. My parents are retired (over 80 years old) and cannot contribute anything to the payments. So we went through a series of deferments but eventually we fell so far behind that the loan is now in default and the principle has increased to over $140,000. I’ve tried to negotiate a lower payment schedule many times but with no luck. I am not legally tied to this loan but, as mentioned above, I had agreed to pay the loan on behalf of my parents who are the only legally bound individuals to this debt.

I was wondering if there was any type of escape clause in our situation where the actual student who borrowed the money is no longer affiliated with the loan and the signer and co-signer are elderly with no means to pay the loan. Thanks in advance.

Gene

Answer:

Dear Gene,

I don’t see how you could just toss them back like a hot potato. It appears you removed your ex-wife’s name from the loan and your parents either were left as co-signers or accepted full responsibility for the loan.

However, as you have learned, deferment is not a solution and just explodes the balances.

I’m not sure what the asset situation is for your parents but if they are struggling, have little assets, and are living off public benefits or a pension, then you might want to read Top 10 Reasons You Should Stop Paying Your Unaffordable Private Student Loan.

READ  I Was Told There is No Help for My Private Student Loans if I Filed Bankruptcy

If you can’t afford to repay the loans at this point, what you need is a strategy and not just a close them in the closet approach. That just makes things worse.

You also mentioned that the loans were used to cover expenses but I wonder if some of those were unqualified educational expenses. If so, that part of the debt could be discharged in a consumer bankruptcy by your parents. See this article for more on how and why.

While there might not be a magic “hand it back” wand, there are some options worth pursuing to ultimately deal with this.

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About Steve Rhode

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.

3 Comments

  1. Steve Rhode

    June 17, 2015 at 2:34 pm

    Just answered your question Gene.

    • JashikChovy

      June 18, 2015 at 10:19 pm

      Thanks Steve. You are correct in that much of the funds obtained were used more to cover our basic living expenses back then. I did read your article on the “Top 10 Reasons You Should Stop Paying….”, which led me to reaching out to you for further discussion. My parents are living off modest retirement/pension but are using almost all of it to cover basic living expenses including a mortgage on a condo they are currently living in. Can they be sued and would their condo be in jeopardy?

      We stopped making payments 6 months ago but we have not received notification of any kind from the loan company or any collection agencies. I’m wondering what the delay is especially with such a large amount of money involved. Thanks again.

      • Steve Rhode

        June 23, 2015 at 11:08 am

        They could certainly be sued. Being judgment proof means their assets are off limits, not that they are immune from being sued. If they are “judgment proof” then it would give you some peace of mind they would not lose anything but you should meet with a lawyer in their state to determine that.

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