If you’re behind on your private student loans, being sued may be the best thing to happen to you.

The client called in a panic, looking for a lawyer to defend a student loan lawsuit that she’d received the previous evening. $78,000 due as a result of a failed attempt to get through graduate school, the amount was laughable for someone barely making ends meet in Los Angeles.

She needed help, and fast. Her anxiety and fear was palpable.

By the end of our consultation, the client was grinning ear to ear.

A Student Loan Lawsuit Is Not A Judgment

Most people who are being sued don’t understand that when a lender – student loan or otherwise – sues you, that’s merely the beginning of the process. The lender wins only if you do nothing, in which case they take a default judgment against you.

Defend the case, however, and you force the student loan folks to prove every single shred of their case before they have a chance of winning. That includes answering the following questions:

  • Does the entity suing you actually own the loan?
  • Is the loan legally collectible, or has it been rendered unenforceable due to the expiration of the statute of limitations?
  • Is the amount claimed to be due correct?

A Student Loan Lawsuit Makes It Easier To Negotiate

If you owe money for a student loan debt, you’re getting calls and letters from debt collectors. Most of the time, those debt collectors are hired by the servicer of the loan as opposed to the entity that owns the debt.

Even in the rare situation involving a debt collector hired directly by the owner of the loan, the debt collector doesn’t have much authority with respect to negotiating a settlement or payment plan.

Once a lawsuit is filed, however, a lawyer is involved. The lawyer’s got a more direct line to the student loan lender, and a greater ability to work out an agreement with respect to paying off the loan.

The Worst Case Scenario May Be Better Than You Realize

If you don’t defend the lawsuit – or if you defend the case and lose – you’ll be subject to a judgment. The student loan creditor can take a portion of your wages by way of enforcement of the judgment.

That’s bad, right? Not necessarily.

Under California wage garnishment law, for example, a judgment creditor can take the lesser of your earnings above 40 times the state minimum wage, or 25% of your after-tax wages. That means if you don’t earn much, you may end up paying very little to your student loan. The judgment accrues interest at 10% per year, but is valid for only 10 years. Once the judgment expires, you’re no longer liable for the remaining balance.

Compare that with the crushing monthly payment the lender is demanding from you. If the garnishment amount is lower than the amount being demanded, then the judgment may not be such a bad thing after all.

Be sure to review your state’s wage garnishment laws before you make the decision to let the student loan lawsuit go to judgment.

No Fear!

If you get served with a student loan lawsuit, it’s not the end of the world. Whether you find a student loan lawyer with white knowledge or fight the case on your own, remember that you’ve got options.

The key is to take action quickly, and understand the process from all angles.