Question:
Dear Steve,
I owe 104K in private loans. I think I have 8. One of the loans has a cosigner.
Can I quit paying my loans and still continue to pay the one with the cosigner? I am to the point where I can't afford to live. I have a good job but can't get ahead. Is it possible with the statute of limitations the loans with only my name could go away?
Jamie
Answer:
Dear Jamie,
If the loans in your name only go unpaid past the statute of limitations, then the loans would not be legally collectible and they could be discharged in bankruptcy.
Now when I say "legally collectible" that requires some qualification. First off, I am not an attorney and I can't give you legal advice. But what I am saying is that private student loans outside the statute of limitations may not be eligible to be enforced by the court, even though a lender may sue you. Lenders or collectors often attempt to collect debt that is not legally collectible. The Consumer Financial Protection Bureau (CFPB) has been trying to get collectors to inform consumers of this fact when they attempt to collect.
The CFPB sums up the statute of limitations nicely when they say, "A statute of limitations is the limited period of time creditors or debt collectors have to file a lawsuit to recover a debt. These periods of time can be two years or longer. They will vary by: state laws, what type of debt you have."
They go on to say, "In some states, the statute of limitations period begins when you failed to make a required payment on a debt. In other states it is counted from when you made your most recent payment, even if that payment was made during collection. In some states, even a partial payment on the debt will restart the time period."
The best strategy when attempting to deal with debt by letting it expire under the statute of limitations is without a doubt for you to meet with an attorney who is licensed in your state and can give you specific advice about the timeline and the type of debt you have.
Once private student loans have expired past the statute of limitations they may be discharged in a quick consumer bankruptcy. You can read These Private Student Loans Can Be Easily Discharged in Bankruptcy for more information.
I'm hoping the loan with the cosigner is current, otherwise the lender or debt owner may go after the cosigner for the full payment on the loan, even if you included it in a bankruptcy.
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