Student Loan Defense
Every day I hear from parents who want to help their children with their students loans by cosigning on these loans. I also talk to spouses, grandparents, foster parents, brothers and sisters, who have the best motives for wanting to help. If you want to help a loved one or family member, and you want to pay their loans for them, that is your choice and you deserve the highest respect. JUST DON'T COSIGN! Why shouldn't you be a cosigner? More families have been destroyed and relationships ruined by debtors who leave the cosigner in a lurch. While it may seem impossible, 5 or 10 years from now, when your child is between jobs and cannot make the monthly payments, the loan will go into default and the bill collectors will come after you for payment. When your credit is destroyed and you are the defendant in a lawsuit, you will be the best example of the saying, "No good deed goes unpunished."
I represent grandparents who are having their Social Security check garnished for federal loans. (Private loans cannot garnish your Social Security, as long as you keep this money separate from your other funds.) At the time these grandparents should be enjoying their golden years they are struggling to pay these unexpected debts, even though they never attended a class!
If you want to have payments withdrawn from your account, that is wonderful. You are in control of the spigot of funds withdrawn monthly. But, do not sign on the "dotted line." Unlike many other loans, if the student is not paying the loan, the cosigner could be responsible for many years of payments. Voluntarily making payments deserve accolades. But, involuntary payments are painful when they are required because the student has wandered off and moved to another state.
Similarly, family members should be extremely careful before co-signing on a car loan. Why? Listen to this true story: One of my bankruptcy clients was a thoughtful grandma who co-signed on a car loan for her devilish grandson because he was unable to buy the car himself. Fast forward a few months. The lovely grandson made a few of the car payments. Then he was cruising late one night enjoying his newfound freedom. The evil grandson fell asleep at the wheel and crashed his car into a church, destroying his vehicle and part of the church. The young daredevil also lost any interest in paying the loan. Do you think that the members of the clergy took pity on this unfortunate grandma and forgave the grandmother for the sins of her darling boy? Not a chance. The company which financed the vehicle showed no sympathy either. Since deadbeat grandson didn't have a job, guess who was sued? In Grandma's circumstances, I had to file bankruptcy to save her from this debt.
I was able to discharge the car loan debt through bankruptcy. However, student loan debt is not dischargeable in a Maryland bankruptcy unless you can prove that you cannot work. Certain rules will allow a federal loan to be discharged because of disability.