Negotiating payment with CA for defaulted student loan

iVillage Member
Registered: 08-24-2006
Negotiating payment with CA for defaulted student loan
5
Fri, 09-09-2011 - 2:09pm
Hi. I am filing for bankruptcy due to medical debt in the next month. I don't have any other debts aside from two student loans. One is a federal loan and is in good standing. It's down to less than 2k now. The other, unfortunately is a private loan that is now about 20k, and once I had exhausted the limited options they offered I was unable to make payments during my extended health problems ans the loan went into default. It is now being handled by a CA. They have not been willing to work with me either (original payments were 120 and they won't take less than 350 and they require me to set up automatic draft). I have not made a payment in several years. The entire loan has fallen off of my credit report now, and I barely even hear from them anymore. But I don't want this to haunt me forever and it needs to get paid off.

My attorney said she would negotiate a lower payment with them for me, but now here is the problem: I make about 35k a year, but I work on flat commission and my actual paychecks vary hugely. Not only that but lean paychecks can go on for two or three months at a time. Arranging for anything more than a bare minimum payment would be financial suicide. I still have regular doctor bills and prescriptions too, as well as paying child support and I have to pay for my DD to fly here and back three times a year, so I don't have tons of extra money in my budget to play with. I was thinking that since I now have their mailing address and my account number (they refused to give it to me on the phone) I might just start sending them a money order every other week for as much as I can afford to send them. Do you think they would just take it and be happy or would they suddenly decide to start shaking me down for more, or worse, take me to court?
Community Leader
Registered: 07-26-1999
If you are filing for BK why would you negotiate any sort of payment p,an. If it was a private loan then it will/should be included in the bankruptcy and if it's a chapter 7 will be discharged, or if a chapter 13, it will be paid through the plan on a payment plan based on the court.

I guess I would need a more detailed explanation of it to answer better.
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iVillage Member
Registered: 08-24-2006
It's a student loan and it can't be discharged. Private student loans are not dischargeable either. I am filing chapter 7.
Community Leader
Registered: 07-26-1999
I know that student loans can't be discharged, but I guess it depends on how its characterized as a private student loan. Some are and some aren't dischargeable, so then yes, it'd be up to your attorney to advise you on whether it is or isn't dischargeable. Usually ones that aren't dischargeable are never handed over to a collection agency, they are kept in-house because they know they aren't dischargeable.

Anyways, as to whether they would be happy with any payment they send you, maybe, maybe not. But if its all you can afford, then that's obvious all they are going to get. They can take you to court, but if you go into court, explain exactly what you just said, you've already filed BK, you have a very limited income, etc., the court isn't going to do much more than set up a payment plan that they think you can afford also. Is your attorney going to charge you more to negotiate and get a payment arrangement set up with the CA? If so, I would instead, since its in default and as of right now you haven't made any payments in quite some time and they aren't exactly coming after you for it, start setting aside as much as you can with the intent on that money going to them for the loan amount, and eventually either when they call again, or sue you, offer them as much as you have set aside as settlement of the debt, or at least use that money set aside as the beginning of a payment plan for them. If you attorney is going to charge you to negotiate with them, its better just to set aside what you would have spend on the attorney and continue setting aside money so when/if they finally decide to fully come after you again, you can offer them a settlement amount. they are usually more willing to go ahead and settle it for a lessor amount if they already think its defaulted and they are never going to get much out of you, and since its already fallen off your credit report, its not adversely affecting your credit right now.
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iVillage Member
Registered: 08-24-2006
My attorney told me it wasn't dischargable. She isn't going to charge me any more to set up a payment plan, but the biggest problem is that my income is really variable so if I have to promise them a certain amount each month it's not going to be able to be very much. The income to pay the loan off over the next few years is there, it just doesn't come regularly enough that I can promise substantial monthly payments. If they are able to successfully garnish my wages it's going to put me in a position where I can't pay my bills every month.

I was thinking that setting it aside and offering them a settlement might be a better strategy as well. As long as my bankruptcy case doesn't stir the sleeping beast. If I had a couple of years to save up I could probably get together enough to offer them a settlement.
iVillage Member
Registered: 05-28-2011
Let them. You cant bleed a stone. I hate these people. They dont need your money but they dont care. Im sending mine 50$ a month after food clothing and my insurance thats all I can afford. Let them pitch a fit.