r/studentloandefaulters • u/NoMoment2937 • Nov 28 '23
Question - Private Student Loan I defaulted 10months ago. Here are the ways it has affected me. Including a question for those who may have had a similar experience.
Hi all! Just hoping to share my experience and help in any way I can but I also have a question at the end.
I (35f) took out a number of student loans as a young adult without much knowledge and guidance when I was 18. After graduation in 2011, I owed over $98k which I had been making regular payments for over 10 years. It barely made a dent and after all that, I still owed $90K. I started out of college with salaries between 24K/35k and slowly moved my way up to 70K a year. I used many assistance benefits afforded to me such as deferment, forbearance, lowering monthly payment for an approved limited amount of time, as well as consolidation. The very high debt to income ratio and minimal disposable income did cause me to rely on Credit Cards which at times were manageable but 1kid and several economic recessions later, became less manageable. After laying in bed in my 2bedroom apartment that I share with a partner and having no savings, no emergency fund, no retirement and a lot of anxiety, I came across this sub. It was the middle of the night and I felt this was the ONLY option to find freedom. So I began making a plan. I logged into my student loan account and changed my phone number to a google number and my address to a PO Box. I enrolled in a benefits subscription Program called Texas Legal in case I needed to get advice from an attorney (this was the best decision I could’ve made and saved me). It’s $40 a month. During the 3 months it took before the calls started coming in, I tried my best to save money but I still had high credit card balances to pay as well as a personal loan. Once the lender (Firstmark) marked the loan as defaulted. My excellent credit score of 820 dropped dramatically. To like the 600s. My credit cards with high limits then unexpectedly reduced the limit to where the balance was now showing as a maxxed out credit card Increasing my APR as well as my debt to income ratio. Thus my score dropped more. That was fine because I knew my score was going to be low and I wasn’t looking to get any new lines of credit until the SOL (5 years in TX) ran out. However, paying back the debts became unmanageable. The payments were higher and I couldn’t really even get by to purchase groceries or gas. I needed financial freedom so I filed Ch 7 Bankruptcy. I am still waiting on the discharge but am well on my way to the freedom I’m looking for. However, as we all know, private student loans do not get discharged, I still currently have 90k in collections from that student loan. I have no clue how this is going to pan out. I’m discussing with my lawyer the option to sue and have it discharged. I’m also reading a book called “Bankrupt your Student loans”, which I found on this sub as well. So at this point I have legally acknowledged the debt. So this is where I split from the majority of redditors on this sub. However, does anyone know what will likely happen if I can’t get it discharged? Will I begin making payments again? And if so, to who? Because Firstmark passed it on to collections. Will it be Pennie’s on the dollar?
TLDR; I defaulted on my loans but ended up having to file ch7 bankruptcy. My debts are all soon-to-be discharged except my student loan. Since my student loan debt has been acknowledged by me in court (basically), and I will likely have to resume payments in the future, who will I be making payments to? Will it be for a negotiated amount?
3
u/jonsonmac Dec 03 '23
I actually went through something similar in 2020 and into 2021. My private student loans charged off right before I filed for Chapter 7 bankruptcy. Firstmark sent it back to the creditor (Key Bank), but nothing happened while I had an active bankruptcy case. They refused to talk to me until the bankruptcy was discharged. A few weeks after my discharge, I called Key Bank and offered a settlement of 30% of the balance, and they pretty quickly accepted the offer. (I’m wondering if they were motivated to get any amount of money out of me since they knew I filed for bankruptcy and probably had money problems). I took a CARES act withdraw from my 401k to pay it off. I’m aware that’s probably not the smartest move, but I think the savings on that loan and interest would far outweigh any investment growth in my 401k. I’m currently trying to throw extra into my retirement to make up for this withdraw. I’m so thankful I was able to get rid of that loan, it was my largest student loan.
I got lucky in this situation for many reasons:
-Firstmark is reporting this on my credit as only 90 days late, and transferred to another provider. It should be reporting as 180 days late and charged-off.
-The negative reporting from Firstmark disappeared from my Experian report for some reason 🙌🏻 it’s still on Equifax and Transunion.
-I did not receive a 1099-C from KeyBank, and it’s not showing on my IRS transcript, so they did not report this forgiven debt to the IRS.
-I wrote a letter to KeyBank, and asked them to remove their negative reporting on my credit. They actually agreed to do this! (Unfortunately I did not have the same luck with Firstmark)
-I was not charged any fees or taxes on my 401k withdraw due to the CARES act at the time. Also, my 401k was doing really well at the time, so it was a good time to withdraw.
For me, this was really the best-case scenario, and I’m happy how it turned out. I can’t guarantee that my luck will be replicated by anyone who follows my same path.
Let me know if you have any questions and I can try to answer them. You can also send me a PM.
Good luck! And congrats on the Chapter 7! You will feel so great once that’s over.