July 18, 2024

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When to Consider Legal Action for Private Student Loan Default

When to Consider Legal Action for Private Student Loan Default

When to Consider Legal Action for Private Student Loan Default

Private student loans can be a heavy burden on borrowers, especially when they are in default. Some circumstances, such as a cosigner’s death or bankruptcy, can trigger default even if borrowers make timely payments.

Lenders can hire collection agencies and take legal action to collect on debt in default. This can include garnishing wages, seizing assets or taking the borrower to court.

You Receive a Summons and Complaint

Lenders or loan holders may file a lawsuit to recover the debt from borrowers in default. This will result in calls, letters and legal action, including wage garnishment, bank account levies and a lien on your home.

When you receive a summons and complaint, it is important to hire the services of a student loan lawyer near me. Without a proper response to the lawsuit, the lender will be awarded a default judgment against you, giving them far more power to take action against you, including taking your Social Security benefits, pension, tax refund or other income.

If you can prove that the student loan creditor is suing you beyond the statute of limitations, it should be thrown out of court. This analysis can be very complicated and involves reviewing state law and the terms of your promissory note. There are many low-cost and no-cost options for a borrower to hire a lawyer to help with this analysis.

You Receive a Default Judgment

Private student loan servicers have a lot of leeway in helping borrowers get back on track before they fall into default. It’s in their best interests to prevent default because they only get paid if a loan is in good standing. But when a borrower falls behind, the lender will take action to force repayment, including garnishing wages, placing financial levies on bank accounts or putting liens on the property.

If you receive a debt collection notice from the owner of your loan, be sure to verify the information and fight aggressively for your rights. Remember, the law requires them to follow specific rules regarding consumer protection, and you can sue a debt collector for illegal practices.

A wrongful default judgment against you will negatively impact your credit, making it difficult for you to qualify for new loans. You can also expect your cosigners to be pursued for their share of the debt if they’re listed on the loan documents.

You Refinance

Private student loan borrowers don’t have the same protections as federal students when it comes to debt collection, but there are still ways that you can take action to try and resolve your defaulted loan. Start by gathering any documents you have, including correspondence with your lender or loan servicer and any documentation of payments that may have been made. It would help if you also considered requesting copies of your credit report.

Once a borrower defaults on their private student loans, the lender can begin turning the debt over to a collections agency and bombarding the borrower with calls, emails, and letters. They can also report the default to the credit bureaus and garnish your wages or tax refund.

The best way to get out of default on your private student loans is to talk to your lender about possible programs to help you get back into good standing, like deferment or forbearance and loan consolidation. They may also offer a rehabilitation option where you can make a certain number of good-faith payments to bring your account current and avoid the consequences of default.

You Represent Yourself in Court

In private lawsuits for student loans, the lender may request a court order allowing them to garnish wages, withdraw money from your account, or place a lien on your home. The lender can sell or transfer your loan to a debt collection agency. This will result in calls and letters by debt collectors.

It is important to keep in mind that debt collectors do not work for you. The creditor pays them to collect a defaulted loan. They often use aggressive tactics to pressure borrowers into making payments or renewing the statute of limitations.

You must also attend all hearings scheduled as part of a lawsuit. It is not optional, but it can be not easy to get out of these court dates if you do not have a lawyer working with you. Some attorneys specialize in representing student loan borrowers and are experienced in defending them against these legal actions.