What happens if you default on a private student loan?
If you default on a private student loan (or other unsecured debt), the creditor has a cause of action against you for breach of contract. In other words, the lender has the right to sue a borrower who fails to make their private student loan payments as agreed.
What kind of debt is a private student loan?
Private student loans are the same as other unsecured debt, such as credit card debt or medical debt, in all ways but one.
Is there Statute of limitations on private student loans?
Private student loans are subject to state statutes of limitations. The only thing that separates a private student loan from any other unsecured debt is that private student loans are currently not dischargeable in a bankruptcy filing, unless the debt creates an undue hardship on the petitioner.
Can a private student loan be discharged in bankruptcy?
Private student loans can be discharged in bankruptcy under narrow circumstances. Private student loan creditors must use the court system to get a garnishment. Bills.com contains many student loan payment resources. Learn What Steps A Lender Can Take if You Stop Paying a Private Student Loan.
Is there a statute of limitations on defaulting on a student loan?
Besides the statute of limitations, there’s a second limit on the repercussions of defaulting on private student loans, and it has to do with your credit score. You may be relieved to hear that most private student loan debt will fall off your credit report after seven years.
Can a private student loan be discharged through bankruptcy?
If your financial situation is truly dire, you may qualify to discharge private student loans through bankruptcy. Note that this process is currently very difficult to do, but it does happen. Still, bankruptcy can wreck your credit and cause headaches for some time to come.
Can a collection agency Sue you for a student loan?
Although collection agencies can’t sue you once the statute of limitations on a private student loan expires, they certainly can before that time. An agency can summon you to court for defaulting on one, several, or all of your private student loans.
Is there a way to stop paying my student loans?
If you have a huge amount of private student loan debt at high interest rates, you may be tempted to stop paying altogether. There are a rare few out there who advocate this approach. But before treading down this risky path, you should know everything that can happen.