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Advice on Private Student Loan Collections After Bankruptcy - The Bills.com Blog
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Advice on Private Student Loan Collections After Bankruptcy
Thursday, Mar 12, 2009
Question: A private loan from my graduate school days was discharged in bankruptcy. Then the insurer of that loan came after me (TERI). According to your site, Texas does not honor wage garnishment for repayment of private student loans. Where can I find that in the statutes? I find no reference to that language in my own search. A statute citation would be very helpful. Thank you.
Answer: Texas law generally does not allow wage garnishment for payment of judgments; of course, this exemption does not apply to garnishments resulting from delinquent child support, taxes, and defaulted federally-insured student loans. This exemption is promulgated in the Texas Property Code, §42.001(b.1); you can review this statute and other related laws online at by visiting this link .Although your loan is “guaranteed” by The Education Resources Institute (TERI), it is still a private student loan, as it was not guaranteed by the U.S. Department of Education. It is not uncommon for confusion to exist as to whether a particular student loan is a private loan or a federally insured loan. Many student loans, such as Stafford Loans, and PLUS Loans, are offered by private lenders, but are still guaranteed by the DOE. For example, a student who takes out a Stafford loan would sign a loan agreement with a private bank; however, if the student failed to repay the loan as required by the note, the DOE would reimburse the bank for its loss. The DOE would then take over the collection of the delinquent loan. Because the DOE is a federal agency, like the Internal
Revenue Service (IRS), it has much more power to enforce debts owed to it; it can garnish a debtor’s wages (even in Texas) without first obtaining a judgment and without regard to most state exemption laws. In your case, though, TERI is a private guarantor of private student loans, which means that it has no more ability to enforce obligations owed to it than any other unsecured creditor, with the exception of favored treatment in bankruptcy cases. In Texas, this means that, even if TERI sued and obtained a judgment against you, it would generally not be allowed to garnish your wages due to the exemptions offered by Texas law.
One reason that this creditor may still be trying to collect on this debt is the fact that the bankruptcy reform act in 2005 made most student loans, including many private student loans, non-dischargeable in Chapter 7 bankruptcy. Generally speaking, the vast majority of unsecured debts are dischargeable in bankruptcy; the discharge included private student loans until recently. However, in 2005, Congress granted private student loans a similar priority as that held previously only by federally insured student loans, making both types of student loans
One reason that this creditor may still be trying to collect on this debt is the fact that the bankruptcy reform act in 2005 made most student loans, including many private student loans, non-dischargeable in Chapter 7 bankruptcy. Generally speaking, the vast majority of unsecured debts are dischargeable in bankruptcy; the discharge included private student loans until recently. However, in 2005, Congress granted private student loans a similar priority as that held previously only by federally insured student loans, making both types of student loans
non-dischargeable in most cases. Due to these changes, even if the TERI loan were included in the schedule of debts filed with your bankruptcy petition, it may not have been discharged as expected due to its non-dischargeable status as a student loan. To learn more about how filing bankruptcy can affect student loans, I encourage you to visit finaid.org . You can also visit http://www.bills.com/bankruptcy/ to read more about the bankruptcy system as a whole.
Since I do not know all of the details of your situation, and am not licensed to practice law in your state, I cannot tell you how you should proceed in resolving this debt. I strongly encourage you to consult with your bankruptcy attorney to discuss the account, especially since you were under the impression that the obligation was discharged in your bankruptcy case. If you find that this loan was not discharged, you may want to contact TERI directly to negotiate affordable repayment terms. To learn more about student loans, I encourage you to visit the Bills.com Student Loan page at http://www.bills.com/student-loans/. I wish you the best of luck in resolving this obligation, and hope that the information I have provided helps you Find. Learn. Save.
Best,
Bill
www.bills.com/blog/
Since I do not know all of the details of your situation, and am not licensed to practice law in your state, I cannot tell you how you should proceed in resolving this debt. I strongly encourage you to consult with your bankruptcy attorney to discuss the account, especially since you were under the impression that the obligation was discharged in your bankruptcy case. If you find that this loan was not discharged, you may want to contact TERI directly to negotiate affordable repayment terms. To learn more about student loans, I encourage you to visit the Bills.com Student Loan page at http://www.bills.com/student-loans/. I wish you the best of luck in resolving this obligation, and hope that the information I have provided helps you Find. Learn. Save.
Best,
Bill
www.bills.com/blog/
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