Question:
My ex-husband and I filed for bankruptcy in 1996. My student loan was placed in the bankruptcy against my wishes. The attorney handling the case stated that everything we had had to be filed on. I had been paying on my student loan for several years and he stated that it qualified. That was in 1996. Earlier this year I received a letter from Sallie Mae (whom my loan was with) telling me that I was behind on my payments. I was baffled by this and after numerous phone calls I was told that student loans could not be charged off and the only reason that I was just now getting a letter was because the loan had been listed with the bankruptcy and as long as it was listed they could not contact me.

I was really upset about this because #1 I didn't want it in the bankruptcy to begin with #2 it continued to accrue interest all that time and I was not aware of it. I had the loan paid down to about $3500 and now it is almost $7000!!!!!! I have tried contacting the attorney and trustee that handled this case and have found out that the attorney is serving time for fraud and the trustee is nowhere to be found. I am still fighting with Sallie Mae over this. The person that I spoke to in the bankruptcy department told me that she would send me the necessary paperwork to file for a forbearance until we could figure out what was going on but I have yet to receive it but now I am getting letters stating that my loan will soon go into default. Does anyone have any suggestions?

Answer:
There is an office that might be able to sort through this with you. You can find the website at http://sfahelp.ed.gov/ or there is a toll free number; The Ombudsman Customer Service Line is 1-877-557-2575. According to the website: The SFA Ombudsman is working with student loan borrowers to informally resolve loan disputes and problems. We help borrowers having problems with the following federal loans:

Direct Loans-Subsidized and Unsubsidized Direct Student Loans, Direct PLUS Loans (for parents), and Direct Consolidation Loans; Federal Family Education Loans-Subsidized and Unsubsidized Stafford Loans, FFEL PLUS Loans (for parents), and FFEL Consolidation Loans; Guaranteed Student Loans, SLS Loans, and Perkins Loans. I have had no personal experience with the ombudsman but have generally heard good things about these types of organizations. Usually, they are staffed with people that want to help and are very good at cutting through red tape.

My ex-husband and I filed for bankruptcy in 1996. My student loan was placed in the bankruptcy against my wishes. The attorney handling the case stated that everything we had had to be filed on. I had been paying on my student loan for several years and he stated that it qualified. That was in 1996.

OK. As long as we're clear that I'm not your attorney, that I don't have any special information about your case, and that you need to check out these things with your attorney, preferably with some additional research of your own, I'll offer some off-the-cuff reactions: Apparently you filed bankruptcy before the deadline that eliminated the 7-year provision from 11 USC 523(a)(8). You might want to take a look at my website to get the details: http://www.geocities.com/CapitolHill/Senate/3215/addenda.htm#amendment. Also see http://www.lawdisks.com/ld_news.htm#anchor352305.

So, all other things being equal, your bankruptcy could have sought discharge on the 7-year basis, and theoretically you might even be able to reopen your bankruptcy filing to include that ground if you didn't mention it before -- uming it was applicable, that is. It's not clear whether your attorney thought it "qualified" because of the 7- year thing or because of an undue hardship argument. > Earlier this year I received a letter from Sallie Mae (whom my loan was > with) telling me that I was behind on my payments. Now, how did the loan get to Sallie Mae? If you consolidated, that probably wiped out your options as far as the 7-year rule; judges usually seem to interpret consolidation as the starting of a new 7-year period. There's something on that in my law review article, there in my website (above) -- search for "consolidation."

I was baffled by this and after numerous phone calls I was told that student loans could not be charged off and the only reason that I was just now getting a letter was because the loan had been listed with the bankruptcy and as long as it was listed they could not contact me.

Well, there's an "automatic stay" that might prevent them from contacting you while the bankruptcy case was still open -- but how long was the case open? In a simple case, it should just be a couple of months. You may have some document from the court telling you when the underlying bankruptcy case closed. This is different from the attorney's effort to get the loan discharged in bankruptcy. That case could drag on for a year or more. But I'm not sure if your attorney actually filed a complaint to determine dischargeability. Anyway, if they were withholding information from you that they should have been providing, and if they weren't prevented from providing information by any ongoing bankruptcy court activity, there still may not be a lot you can do about this. There have been some rumblings recently about how there should be a private right of action (i.e., grounds for a lawsuit) against student loan institutions that don't play by the rules, but my general sense is that this right does not now exist. If they don't observe the rules, maybe the best you can do is complain to them, or at least complain about them to someone else.

I was really upset about this because #1 I didn't want it in the bankruptcy to begin with #2 it continued to accrue interest all that time and I was not aware of it. I had the loan paid down to about $3500 and now it is almost $7000!!!!!!

This raises the issue of exorbitant collection fees. I'm not sure whether it applies in your case, but 100% interest does sound a bit much for just a three- or four-year period of accumulation. Probably you're a victim of common collection agent practices, which is to bill the student borrower for the maximum amount permissible by law, regardless of whether any collection effort has actually been made. Again, I don't know the ins and outs, but this may be something on which you have some rights. My theory, which I have not tested in litigation, is that this practice is essentially a matter of unenforceable "liquidated damages" and that you should be able to get some of those fees rolled back if you sue. You might want to contact George Gingo on that part of your case. It's my general impression -- although, again, I have not researched the issue -- that once the thing goes into bankruptcy, you probably won't be able to get it back out. But I definitely could be wrong on that; it might indeed be possible to amend your bankruptcy filing to de- list that debt.

I have tried contacting the attorney and trustee that handled this case and have found out that the attorney is serving time for fraud and the trustee is nowhere to be found.

Well, your attorney's plight may provide an argument that another attorney (or you yourself) could use on your behalf. It does seem that you might have suffered from ineffective counsel. I'm more surprised that nobody can find the trustee. Check the Martindale-Hubbell Law Directory in your local library. Surely s/he used the trustee experience as a springboard to something else; that does seem to be the standard approach.

I am still fighting with Sallie Mae over this. The person that I spoke to in the bankruptcy department told me that she would send me the necessary paperwork to file for a forbearance until we could figure out what was going on but I have yet to receive it but now I am getting letters stating that my loan will soon go into default.

Given the figures mentioned above, I'm surprised your loan has not already gone into default. Or maybe it has. Are you sure the additional $3,500 is all interest? Have you asked to speak to a supervisor at Sallie Mae? I know that's kind of obvious, but it doesn't hurt to start with the basics. You might also try calling the office of the ombudsman at the Department of Education. I haven't used them, but I would be interested in your reactions if you do try them. See http://sfahelp.ed.gov/. If Sallie Mae is really determined to screw up your paperwork, there may not be a lot you can do about it. This has heard from a number of people who are frustrated with the DoE, with guarantors, with Sallie Mae, etc. This is a first shot. It doesn't pretend to answer all of the questions that might lurk in your words. Please feel free to follow up with additional questions.