Why Thousands of Defaulted Private Student Loans May Be Uncollectible

Posted on August 2, 2017 at 12:00pm by
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More than $5 billion in defaulted private student loans could be discharged due to lost paperwork. These loans were originally made by banks, but then sold to the National Collegiate Student Loan Trusts (NCSLT), a group of 15 trusts that holds 800,000 private student loans worth $12 billion.

The loans in question are missing identifying paperwork linking thousands of borrowers to these debts. NCSLT has sued borrowers to collect these debts, but several courts have called the defaulted student loans “uncollectible” because of the missing paperwork. In fact, judges in Texas, Ohio and New Hampshire have already dismissed dozens of lawsuits filed lawsuits filed by the NCSLT.

One case covered by the New York Times involves a 33-year-old graduate with thousands of dollars in private student loans. After she defaulted on her debt, NCSLT filed a lawsuit to collect. However, the woman’s attorney alleged NCSLT’s paperwork was a mess. Not only did the paperwork fail to establish the loans belonged to her, she had been sued for loans she never took out. NCSLT claimed she had owed debts for a school she never attended. The court ruled the $31,000 in loans were uncollectible because NCSLT could not produce paperwork showing she was responsible for the debt.

Will My Defaulted Private Student Loans Be Dismissed for Missing Paperwork?

Some of the NCSLT’s lawsuits have been successful because borrowers do not show up after they are summoned to court. By failing to show up to court, a creditor can obtain a default judgment to garnish your wages or Social Security payments. However, hundreds of these lawsuits have also been dismissed due to missing paperwork. If your defaulted private student loans are held by NCSLT, it may be worth contacting an attorney.

The Kansas City bankruptcy attorneys at The Sader Law Firm can help you learn if you have options to manage payments or discharge student loans.

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