If my father co-signed for several private student loans for me 9 years ago and I default, can they go after my father’s estate?

I have paid them since my loans have come out of forbearance/deferment, however, they are asking $719 a month and I am about a month away from defaulting. My father died this year. I sent the lender a certified copy of his death certificate. I work for a state government and make about $31,500 per year. I cannot afford a $719/month payment, which is almost half of my monthly income. Would I have a shot at Chapter 7, even if it’s just some of the loans? I am also considering Chapter 13 just to get some debt relief.

Asked on September 3, 2013 under Bankruptcy Law, Indiana

Answers:

Terence Fenelon / Law Offices of Terence Fenelon

Answered 7 years ago | Contributor

First of all, let me address the estate issue.  Was your father a co-signer or a guantor of the loan?  In any event, the creditor could not bring an action against the estate until there was an actual default.  Was an estate opened?  Are there any assets?

If there were assets, the creditor would have a claim against the estate.

As for filing for bankruptcy relief, a studaent loan is typically non-dischargeable and would not be affected by a chapter 7.  Collection efforts would cease while the case is pending, but absent a determination of dischargability by the Bankruptcy Court, collection efforts would resume after closure of the case.

A chapter 13 could effect the payment terms of of the loans, but typically can't strip away balance.  However, I have fould that private lenders often do not object to Chapter 13 plans which provide for payment.  If a plan could be drafted to forgive the remaining balance upon completion of the plan, you may prevail.  Speak to a lawyer in your juristiction familiar with such issues. 

Good luck.

 


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