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What to Do If You’re Sued For Your Student Loans

Finding out that your student loans are suing you can scare the living daylights out of you. Many people do nothing in the hopes that it will just disappear if they ignore the lawsuit. But that’s the most dangerous reaction to being sued for student loans.

If you ignore the lawsuit and do nothing, the student loan company will get a judgment against you. This judgment gives the lender the ability to take additional actions such as wage garnishment, bank account freezes, and placing liens on your property.

The judgment can last for ten years – more if the student loan creditor gets court approval to extend the effect of the judgment. During that time, interest continues to accumulate on the debt.

That’s why it’s important to act quickly in response to any student loan lawsuit – failure to do so will limit your options in the future.

Do You Owe The Debt?

You’ve got to review the court papers to ensure that the amount due is correct, and the creditor (the people who are suing you, listed as Plaintiff on the court papers) is correct.

If you’re 100% sure that BOTH of those things are correct, do two things:

go to the courthouse and file an Answer. It doesn’t need to be complicated, just something that prevents the student loan company from taking a default judgment against you; and
make a phone call to the lawyers representing the student loan company.

When you talk with the lawyers on the other side, find out if there’s a payment plan or one-time settlement amount that they’re willing to accept to resolve the matter. Before accepting any offer, sit down with a lawyer or accountant to talk about tax implications and other potential financial fallout.

Get all offers in writing, as well as any final settlement agreement. Otherwise, the student loan lender may change the terms and you won’t have any proof of what was agreed upon.

Consider Bankruptcy

If the amount is correct but you can’t get it settled, consider filing for bankruptcy.

No, not because bankruptcy will wipe out your student loans. But because bankruptcy may ease the burden of paying your other debts, putting you in a better position to pay the student loans.

You can also look into filing a repayment bankruptcy that will allow you to make monthly payments for a 3-5 year period of time in the hopes that your finances improve before the end of the repayment plan.

If Things Don’t Add Up

Let’s say you go through the lawsuit papers and don’t recognize the name of the student loan company suing you. Or the amount they claim that you owe isn’t quite what you remember it to be.

You may be tempted to pick up the phone and call the lawyers working for the student loan lender. Or you may sit down and write an angry letter.

Neither of these will protect you from a default judgment.

In order to protect your rights – and to prevent a judgment from being filed against you – you’re going to need to file and serve an Answer in court.

Doing so will not only protect you, but will also force the student loan company and their lawyers to prove every element of the case. That include the amount due and a host of other things.

In addition, it also provides you with the opportunity to counterclaim if you believe that your rights have been violated under federal and state collection harassment laws.

Remember that you’ve only got a limited amount of time to act before a default is taken against you, so don’t waste any time.

Nobody wants to be sued for a student loan, but working to resolve the issue quickly and effectively is in your best interests.

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By |June 11th, 2014|

About the Author:

I’ve been a consumer protection lawyer since 1995, working to help people end their bill problems. I’m a faculty member at the Student Loan Law Workshop, a nationally recognized speaker, and a long-time member of both the National Association of Consumer Bankruptcy Attorneys and National Association of Consumer Advocates.

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