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What will happen if I can't pay back the student loan?

I'm being sued for a Sallie Mae student loan and I can't pay, what's going to happen?

  • Sallie Mae Financial is sueing me for the full amount + interest, etc., of my student loan. It was a private student loan. The amount is almost $7300, and I am unemployed, have no assets except a broken down old chevy malibu, I have nothing. I can't pay. I don't know anything about being sued. What's going to happen to me? Will I have to go to jail? Do I have to file for bankruptcy? What happens then? On top of that, I had a cosigner and she is being sued as well. So what is going to happen?

  • Answer:

    The answer to your question will depend in great measure on the state in which you live. Regardless of state, Sallie Mae will ask the court for a judgment, which is nothing more than a legal claim against your property. With judgment in hand, Sallie Mae can ask local law enforcement agencies to seize certain kinds of property - again, the kind of property that you can shield from a creditor is determined by the state in which you live. In most states, Sallie Mae can ask the court to impose a wage garnishment order. When a judge approves a wage garnishment order, your employer would receive an order from the local court to withhold a certain percentage of your weekly pay - and forward that money to the court. Depending on where you live, the garnishment order could require that as much as 25% of your after-tax wages be withheld. Texas and Pennsylvania are two states that do not allow wage garnishment for an unsecured loan (a student loan is an unsecured loan). Here's the problem for you - the judgment remains active for several years, and so does the garnishment order. If you have no seizable assets now, and no job, Sallie Mae will wait patiently for you to get a job and/or purchase seizable assets. Again, the timing depends on the state where you live - some states allow a creditor 5 years to enforce a debt judgment, other states allow as many as 20 years. Regardless of state, any creditor that has to sue to enforce a debt (and this isn't Sallie Mae being cruel, any creditor would do this) will report their collection efforts to all 3 of the major credit bureaus. Once a debt judgment appears on your credit report, you're going to have an impossible time getting a mortgage, a business loan, a car loan or any other form of loan. You won't be approved for any real credit cards. Any existing cards that you have may decide to raise your rates to the maximum legally permitted default rate. You will probably be rejected for an apartment lease, if the landlord does a credit and background check as a part of their application process. You may be rejected for jobs, particularly if those jobs involve any responsibility for handling money. I'm going to go out on a limb and guess that you reached this terminal point of debt collection by trying to ignore you way through dealing with this debt. At one point in this process, the lender would have been more than happy to work with you to arrange a forbearance and a payment plan - but by this point, they've long since concluded that you're not interested in making good on your debt, and decided that the only way they are going to get their money back is to sue you. I'm sorry to say that you have no chance of "winning" in this court proceeding. The lender's attorney will present your signed promissory note, and there's little that you can do to argue that you should not be expected to uphold your end of the agreement. The lender gave you the money years ago, and you didn't keep your end of the bargain by repaying it. In contracts law, that's a pretty slam dunk case. You won't go to jail, because the US banned debtor's prisons a few hundred years ago. You won't be able to file for bankruptcy - well you can file for bankruptcy if you'd like, but it's not going to help you with these debts. Student loans - regardless of whether they are federal government loans or private lender loans are not dischargeable in bankruptcy proceedings. As for your cosigner - therein lies the risk of cosigning. Your cosigner is on the hook and Sallie Mae will almost certain get a judgment against her, too. If she has an income or seizable property, Sallie Mae will ask for a garnishment order and/or ask local law enforcement to begin seizing any at-risk property. If you ever get the chance to make a cosigner decision again, now you know why it's always a sucker bet. I'm sorry that the news is horrendous, but a lot of this could have been prevented if you had faced up to the debt when your payments first started coming due. You wouldn't necessarily have had to pay them, but you should have negotiated an alternative payment arrangement with the lender. Now, both you and your cosigner are in a major financial mess that is going to have severe repercussions on your lifestyle and your credit record. Best of luck - I hope you're able to work this out.

William at Yahoo! Answers Visit the source

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Other answers

Your first answer was your best, although the second did have some information. I find it arrogant to assume you just ignored the problem. I have worked with my loan companies over the years, but due to an accident a year out of school I have been unable to pay. I am also now headed into litigation. Here's what the person before me had wrong: 1. You CAN discharge loans in bankruptcy. However, only private loans (TERI/Educational Resource Institute). It's not easy because certain criteria need to be met, and the Judge must decide that repayment would be an "undue hardship to the borrower or their dependants." This, as does all this information, vary by state. 2. You can also discharge Federal loans under certain circumstances. This is called a hardship waiver (in bankruptcy court discharging debt is also called a hardship). Once again, certain criteria apply: total and permanent disability, didn't finish school, school closed, etc. 3. One thing that I am finding unclear, meaning it's worked sometimes and not others, is to claim that private loans are just that, private. Meaning that the statute of limitations apply to this contracts or promissory notes in your state. I have seen cases vs TERI/EDI dismissed for that, and I've also seen the defendant/borrower lose. You can call the Student Loan Ombudsman to clarify your loan situation: 877-557-2575. Take the option that allows you to speak to a representative. Definitely find an attorney, and have your co-signer do so as well. Unfortunately the government has lifted so many restrictions on lenders that they have the freedom to sue you for life in some cases, and they aren't required to follow many traditional civil procedure rules and statutes. You may have a Legal Aid there that can take your case, or other consumer/bankruptcy attorneys that can (although usually for a fee). This is a difficult and time consuming process, and you must be diligent. Your co-signer might want to consider moving money out of bank accounts in his/her name, and signing assets over to a family member or trusted friend. Garnishment is still a possibility. You're not alone here, so search and read everything you can on the internet as well as in your state's civil code (or code of civil procedure). Here's luck for both of us.

Wendi W

You need to talk to an attorney. And make sure you make all court appointments. Basically, if you don't have the money, they will put leans on future property you may own. They will also take any income tax refunds you would receive and they will be able to garnish your wages when you DO get a job. I don't think you can claim this as a bankruptcy default, but like I said, talk to an attorney. Also, if you are married or going to get married, and you live or work in a marital property state, they can go after your spouse's finances. You almost certainly won't go to jail. If you can't pay and your co-signer has a job or assets, then they will probably go after them and either take property, or garnish their wages. They are going to go after one or the other or both of you to get the money that is owed to them as quickly as possible. If your co-signer has money or a job, they will most likely go after them first. Or if your cosigner has a nice car worth over the money that is owed, they may take that. And they can't take any money or property until the judge orders it, so make sure you are in court. Times are hard on financial institutions right now and they aren't fooling around.

Jm e

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