Bankruptcy Law, Credit, Timothy Kingcade Posts

Student loans come with Unexpected Hardship for some Borrowers

For borrowers who take out private student loans, the death of a parent can come with an unexpected hardship. Even borrowers who have a perfect payment history can face sudden demand for payment in full or be forced into default if the co-signer of their student loan passes away. Many students who take out loans for college have minimal income or have yet to build up enough credit, so borrowing from banks and other private lenders often require a co-signer, usually a parent or other relative.

The problem arises from a little known provision in private loan contracts, which states: “If the co-signer dies or files for bankruptcy, the loan holder can demand complete repayment, even if the borrower’s payment record is spotless.” If the loan is not repaid, it is declared to be in default and can do damage to a borrower’s credit record that can take years to repair.

The Consumer Financial Protection Bureau said that after a co-signers death or bankruptcy, some borrowers are placed in default without ever receiving a demand of repayment. An increase in consumer complaints indicate this is becoming a common practice among certain banks and private lenders; some are even doing this automatically- combining public records of deaths and bankruptcies, comparing them to loan records and generating repayment demands and default notices.

A little known fact: Borrowers can have their loans released from the co-signer requirement if they have a few years of earnings and credit history, or have the loans transferred to a new co-signer. However, many borrowers are unaware of this because the loan companies make it difficult to exercise these options.

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For borrowers who are struggling with student loan debt, relief options are available. Many student loan borrowers are unaware that they have rights and repayment options available to them, such as postponement of loan payments, reduction of payments or even a complete discharge of the debt. It is important you contact an experienced Miami bankruptcy attorney who can advise you of all of your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade & Garcia, P.A. has been helping people from all walks of life build a better tomorrow. Our attorneys’ help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade & Garcia website at