What do I do about my school debt lawsuit?

May 19, 2009 1:00 PM

I just got served papers showing that I am being sued for university tuition. What next?

I'm scared. I moved away from home to attend university, but I was kicked out after a year for failing grades and back tuition. I owed approximately $10,000. After a few months of being away from the school and not paying them anything, I got a call from a collections agency. They had bought(?) my debt and were responsible for collecting. I made an agreement to pay $150 a month. I did that for 4 months or so, then there was an emergency that caused me not to be able to pay last September. Since then, I have been living paycheck to paycheck (literally, on $10.50/hr at 32 hrs/wk, so I know it shouldn't be that bad but I live with my boyfriend who has a richer lifestyle than I do and it's hard to say no when he asks if I can buy something) and have been unable to make the required payments. I was just served papers today that say I am being sued. I know you are not my lawyer, but I need advice. What should I try to do? How can I make this process less onerous? What do you expect will happen? Will this hurt my credit? Email at [e-mail].

posted by anonymous to law & government (13 answers total)

Yes, collections agencies can buy debt. They pay the amount you owe to the university, and then collect it from you.

Get a lawyer.
posted by Electrius at 1:02 PM on May 19, 2009

you need to speak to a lawyer and get this sorted ASAP.

I don't want to sound like an arse but in future make sure your debtor knows your situation, they'd rather have some money being paid back monthly than non at all.
posted by nam3d at 1:11 PM on May 19, 2009

bankruptcy might be a good option, I would imagine your credit rating is pretty screwed. Talk to a lawyer that knows bankruptcy.
posted by delmoi at 1:15 PM on May 19, 2009

IANYL

What should I try to do?
You should get an attorney who can file an answer for you. And by answer, I mean a legal response, not a letter from you saying you can't pay. Try local legal aid places that offer income contigent payment plans for affordable representation.

How can I make this process less onerous?
STOP IGNORING THIS PROBLEM. You have at least TWICE failed to meet your obligations here. It's really time to stop putting your head in the sand ("[I]t's hard to say no when [boyfriend] asks if I can buy something." Are you serious?). You might want to address this cavalier attitude with a credit counselor.

What do you expect will happen?
They will sue you, get a judgment against you whether you respond or not, and will garnish your wages and/or tax returns. The alternative is that you will enter into an agreement with them to pay off the debt - which will now include exorbitant collection and attorney fees, btw. Either way, your hand will be forced into taking responsibility for a situation you have worsened by your own actions. Sorry to be harsh, but that's the reality you need to wake up to so you do not repeat this behavior.

Will this hurt my credit?
Yes. It probably already has, as a matter of fact.

Student loans cannot be discharged in bankruptcy, btw.
posted by December at 1:17 PM on May 19, 2009 [16 favorites]

I am not a lawyer.

You most likely need a lawyer, unless you're being sued in small claims court (doubtful if the amount you're being sued for is near the $10K you owe).

If you ignore the suit, then the debt collection agency will receive a default judgement against you. This will hit your credit report and depending on how agressive the debt collection agency is about enforcing the judgement could result in you having wages garnished and/or property seized until the judgement is satisfied.
posted by de void at 1:19 PM on May 19, 2009

you need a lawyer. you shouldnt be seeking any advice from this forum, or any other person who is not your legal counsel.

In the explanation to your question, you have made admissions which could be used against you. "I owed approximately $10,000." "have been unable to make the required payments."

Get a lawyer, and talk ONLY to your lawyer about it.
posted by Flood at 1:19 PM on May 19, 2009

I am not your lawyer, I used to do public interest work related to debt lawsuits, and I would encourage you to look into legal aid for civil cases where you live. This isn't the end of the world by any stretch. $10K while daunting is tiny in the realm of judgments.

Worst thing that happens is that they win and try and garnish your wages, in many states there is a defined minimum amount they can leave you with and I doubt they can garnish much on $350.00.

If you have a rich relative, borrow some money and offer to settle.

A judgment will hurt your credit, you should work to pay it off, be sure to get paperwork stating it has been paid off from the lawyer for the plaintiff once you have paid it off. If you are making payments keep records of how much you are paying, it is not uncommon for them to forget where you are with payments (happens all the time).

I'll drop you an e-mail.
posted by Ponderance at 1:24 PM on May 19, 2009

my boyfriend who has a richer lifestyle than I do and it's hard to say no when he asks if I can buy something

"A richer lifestyle"? What? At the least, you need to tell your boyfriend that you're in dire financial straits and you need his (emotional, if not financial) support.
posted by kittyprecious at 1:42 PM on May 19, 2009 [5 favorites]

Will this hurt my credit?

This already hurt your credit when you went to collections. You credit will be shot for a minimum of 2 years, and this will be on your record for 7 years.
posted by ShootTheMoon at 1:47 PM on May 19, 2009

Payments to a financial institution that are 30-60 days late stay in your credit report for 7 years and affects your credit score for as long as they payment is past due. A 90-day late payment or an account that's sent to collections both have a serious long-term negative effects on your credit score. Filing for bankrupcy will have a similar effect.

You should look up legal advice that's offered on a sliding scale or for low-income people in your area. I would also see if you can find part-time work, or a better-paying job.

I don't make much more hourly than you, so I had to make some hard choices- I turned off my cable, stopped going out to eat, avoided buying new clothes if I can make do with what I have. The fact that's it's hard to say no to your boyfriend isn't a very good excuse for spending money that you don't have. I put about 10% of my paycheck into savings every month, and I certainly do not have a miserable lifestyle. Instead, I feel really good about my financial future- I plan to buy my next car without taking out a loan, for example. Once you get back on your feet, I would seriously consider taking a class on money management, and make it a priority to start saving an emergency fund so that emergencies don't preclude your ability to pay very important bills. You can do it!
posted by emilyd22222 at 2:42 PM on May 19, 2009

Student loans are the worst. They can't be discharged in bankruptcy and there is no statute of limitations on collecting them. More information on the sorry state of this industry here. The National Consumer Law Center's Student Loan Borrower Assistance Project is very helpful for general information. The website has a section on collections.

If you can find an attorney, get one. But free legal services for people with consumer issues is still an under-served area. Go to www.lawhelp.org and see what resources may be available to you in your area. You're more than 125% over the federal poverty level, so you may only be able to find volunteer lawyers who can give you advice. (Which can still be very helpful!)

Most importantly, do not ignore this problem anymore. It will not go away. It will get worse. If you do not answer the summons or if you miss a court date, they can get a default judgment against you (with interest and legal fees) and garnish your wages.
posted by Mavri at 2:42 PM on May 19, 2009 [1 favorite]

It's not 100% clear to me from the OP that the debt is actually a student loan. If they failed to pay tuition the school may have been trying to collect for services rendered before selling the debt. The rules could be different if that's the case.

Now I have no idea if that's the case, but the lawyer that you need to retain ASAP should.
posted by EmptyK at 6:57 PM on May 19, 2009

In addition to a lawyer, you should sit down with your boyfriend and have a frank discussion with him about you finances and what you can and can't pay for. In unequal income situations, it often makes much more sense to pay proportionately than splitting equally. If rent is too high, suggest that you pay proportionally (if he makes twice as much as you, then he pays two thirds and you pay one third) or that you find an apartment within your means. Likewise, tell him what you can spend on entertainment and luxuries, and tell him that either he agree to live within your means, or that he pay the difference between your share of what you can afford and what he wants.
posted by carmen at 10:47 AM on May 20, 2009