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Did the change to private student loan lenders open up a loophole?

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In California, there is a statute of limitations of 4 years for debt collection. I have 200k in student loans. If I stop paying for 4 years, what happens?

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What change to private student loan lenders are you talking about?

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tedteddy said:   In California, there is a statute of limitations of 4 years for debt collection. I have 200k in student loans. If I stop paying for 4 years, what happens?

That's 4 years from the date of your last payment, so you'll probably get sued and end up spending 400k+ pay off your loans.

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My private student loan lender gave me a rate lower than a mortgage on unsecured debt. I doubt they'd be giving me 2% if they had any apprehension about people being able to discharge them in bankruptcy.

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This is not bankruptcy. It's the discharge of debt.

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tedteddy said:   This is not bankruptcy. It's the discharge of debt.
Regardless, 2% loans wouldn't be available if a simple default and dodging collection agencies for 4 years actually worked.

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I bet they'll sue you and garnish your wages before the 4 years is up.

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tedteddy said:   In California, there is a statute of limitations of 4 years for debt collection. I have 200k in student loans. If I stop paying for 4 years, what happens?
  
I think I remember hearing criteria for this.  Was it something like, 4 years after you stop making payments AND only if they don't sue?

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Pay your bills, deadbeat.....

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jd2010 said:   
tedteddy said:   This is not bankruptcy. It's the discharge of debt.
Regardless, 2% loans wouldn't be available if a simple default and dodging collection agencies for 4 years actually worked.

  
My loans are at 6.9% I believe.

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tedteddy said:   In California, there is a statute of limitations of 4 years for debt collection. I have 200k in student loans. If I stop paying for 4 years, what happens?
  The statute of limitation applies to them taking action to enforce the debt.  They can sue you after a couple months, get a judgement, seize certain property, and possibly start garnishing your wages.  People get away with small debts where the cost of court proceedings is not worth the trouble.  That's not the case when we're talking about $200,000.

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Why don't you try it, and come back in 4 years and let us know how it works out for you?

That is, if they have internet access in prison and let you post on FW.

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AlwaysWrite said:   Why don't you try it, and come back in 4 years and let us know how it works out for you?

That is, if they have internet access in prison and let you post on FW.



He won't go to prison

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AlwaysWrite said:   Why don't you try it, and come back in 4 years and let us know how it works out for you?

That is, if they have internet access in prison and let you post on FW.

 
Can't be imprisoned for debt. Though garnishing your wages thin and seizing your assets may make you turn to a life of crime, no doubt.

That said, pay your bills deadbeat. 

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Which lender was it?  Is it for undergard or graduate loans? The lowest I could find was 4.5% fixed for graduate loan and it is much higher than my mortgage.

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Actually, you have asked a very good question. It applies to private student loans not federal student loans. The poster who said that the clock starts at the last payment (not when the loan was granted or at the start of the payback period) is correct.

Had you originated a loan with one of the various private student loan companies who went bankrupt a few years ago - a defaulted loan may have gone permanently unpaid. That is, if the private loan company did not file suit in time. Or if the purchaser of the debt (usually for pennies on the dollar), either a collection agency or attorney, failed to file suit in time. The loan is not discharged, it is simply uncollectible. This is a distinction with little difference. What we are discussing is the failure to file suit within the California Statute Of Limitations period for private student loans.

Just an FYI. Once a judgement has been obtained in California, it can be extended for ten years, but that is not automatic. The party in receipt of the judgement must file an extension. It the extension is not filed, the debt is uncollectible. 

While an unpaid private loan can become uncollectible, this does mean that your credit score won't take a hit,  it will. But two or thee years after the private student loan becomes uncollectible, your credit score starts to rebound, so most people are okay. This scenario is different from bankruptcy, because theoretically your credit score is harmed for seven years. In actual practice the credit score can start to improve slowly but surely after the bankruptcy, depending on the actions a person takes to start rebuilding their credit.




 

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Holy crap, 200k. What degree did you get? Hope it was worth it.

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tedteddy said:   This is not bankruptcy. It's the discharge of debt.
  Bankruptcy is about the only way to have debt discharged.  The statute of limitations only restricts what a creditor can do to attempt to collect the debt, but you'll still owe the money indefinitely.

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As Glitch said, the Statute of Limitations for filing a suit only limits the ability of the creditor to sue you. It does nothing else.  You still owe the money, they can still report it to the credit bureaus  until the 7 year statute of limitations for reporting is up, and they can still send collectors after you forever (but once the statute to sue has expired, you just send each collector a FOAD letter).

And as others have said, the obvious solution from the creditor's point of view is to file suit within the statue of limitations. Then it won't be debt, it'll be a court judgement against you. Look up your state's laws for judgment enforcement steps that may be taken, when a judgement expires, how a judgement can be renewed to prevent it from expiring...
 

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"Bankruptcy is about the only way to have debt discharged" is an incorrect statement. A private or federal student loan can also be fully discharged based on disability. Though, it has to be approved. This separate procedure and has nothing to do with bankruptcy. Just an FYI. 

Again, if the SOL has expired for a private student loan in California, it is uncollectible. Like other zombie debt though, I am pretty certain, if the borrower makes even the slightest payment, the debt can be revived.

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IrateConsumer said:   "Bankruptcy is about the only way to have debt discharged" is an incorrect statement. A private or federal student loan can also be fully discharged based on disability. Though, it has to be approved. This separate procedure and has nothing to do with bankruptcy. Just an FYI. 

Again, if the SOL has expired for a private student loan in California, it is uncollectible. Like other zombie debt though, I am pretty certain, if the borrower makes even the slightest payment, the debt can be revived.

Does cutting off one's nose to spite one's face count as a disability?

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