Most of us have some form of debt, even if it’s just a credit card we haven’t been able to pay off or a loan on our car. One of the most common types of debt, besides medical debt, is student loan debt. We tend to get into an insane amount of debt for schooling, and in most cases, we never have a way to pay it off. You may spend your entire life paying off the interest for your student loans and never even touch the capital that you owe. And that’s no way to live. Here are a few defenses to prevent your student loans from making you go bankrupt.
Different types of student loans
There are two types of student loans: federal and private. Federal loans have protections from lenders that most private loans do not. There are thousands of lawsuits filed every month against people who cannot afford to pay their student loans. And if the borrower does not respond to the court, they have no choice but to rule in favor of the lender.
What if the creditor can’t prove they are owed a debt?
Most private student loans are transferred from their original lender to investors, through a process called “securitization”. This is where thousands of loans are pooled together and then sold as a package. So the lender will need proof that they actually own the loan.
The debt may be beyond the statute of limitations for collection
The collection of private loans is controlled by the state, unlike federal student loans. Eventually, the lender may lose the rights to collect your debt. If the creditor waits too long to sue, they may be outside the statute of limitation for that state for breach of a written contract(for example, Arizona has a 6 year statute of limitations). In that case, you would no longer have to pay it.
The creditor is not licensed to do business in that jurisdiction
This is another way that you may get out of your student loan debt. Some states require what is called a “foreign corporations” to register to operate in their area. If the creditor fails to do this, it can prevent them from using the local court system to sue you and pursue payment of your student loans.
If you are in a lot of student loan debt, let us know, and we’ll see what we can do to relieve you of some of your debt without having to file for bankruptcy.