Studen Loans, Bankruptcy, and Co-Signing

Alright, heres the story...

Last year I received my BA. My mother co-signed for two private loans through Sallie Mae. Several years back, i had made some BAD credit decisions (namely sharing a credit card with an X-gf, who wasnt an X at the time and getting sick and wracking up hospital debt) and decided to declare bankruptcy. I had talked to a lawyer who agreed it would be a good move in order to start over so to speak.

My mother was diagnosed with cancer. Shes on permanent disability.

Heres the rub...unbeknownst to me or my mother, I discovered that she was now 100% responsible for the loans, due to the bankruptcy. Therefore, Sallie Mae is now coming after her hard, threating to put a lean on her house, take her social security, etc.

Heres the question. Is there any way I can get the loans back under my name? The first payment was due June/08, which i made. I have every intention of paying the loans back. But i do not want Sallie Mae coming after my mother. My lawyer never made me aware that this was even possible. I realized student loans are not discharged with bankruptcy but neither my mother or I had ANY idea she would be considered the ONLY lender after i declared bankruptcy. Ive been looking online and there are two ways to get student loans discharged. A)Hardship and B)permanent disability.

I was also led to believe through Sallie Mae that once I received my bankruptcy discharge papers (which I received today) the loans would go back under my name.

If i had know this was at all possible id never have had my mother co-sign or declared bankruptcy. I didnt even think to look for something like this when i decided to go through with the bankruptcy. Theres no website or info that has this info in an easy to find manner. The only info i was ever able to get was what i already knew, bankruptcy isnt a means to get rid of student loans. Im not even trying to get rid of them, i just want them back under MY name, not my mothers.

Thanks in advance for any info or help you lot might be able to give.

I'm sorry. But this is one of the dangers of being a co-signer on a loan -- the original borrower (in this story, YOU) can default or declare bankruptcy, and the co-signer is stuck with the huge bills.

I'm not sure how/why you and she did not understand that this is what it means to be a co-signer.

Your mother needs to consult a lawyer. Being on permanent disability is a way she can get what is now HER student loan debt discharged. You need to quit paying -- yes, I just said that. Your share of the debt has been discharged. IF your mother can't get HER student loan debt discharged, then you should pay the debt that is in her name for her (after all, it IS your responsibility in a moral sense, if not in a legal sense). Meanwhile, if -- knock wood -- she passes before the debt is discharged, the debt is usually erased (consult the original student loans docs, but I recall that my own student loans would disappear upon my death).

Her Social Security is COMPLETELY SAFE from these kinds of debts, so long as she's not co-mingling her SS money with other money. If she is, she needs to open a separate account for her SS money at once.

Depending on her situation and where she lives, her home may also be safe.

But she needs to see an attorney at once, and see what can be done to discharge this debt due to her disability. It may be that a strongly worded letter from an attorney, backed up by her permanent disability documentation, may make this whole thing go away.

I don't know how to help you. But if you get your loans discharged through all these technicalities... That is totally unfair.

I don't know how to help you. But if you get your loans discharged through all these technicalities... That is totally unfair.

It's not at all unfair. Private student loans are dischargable in bankruptcy because they are not backed by the federal government. It's the Fed-backed loans that cannot be discharged. However, the Fed-backed loans have lower interest rates and more favorable terms, which is why people choose them over private loans -- and should -- any day of the week.

He's not enjoying any "technicality" at all. He went through bankruptcy. That discharges debt. It's the basic function of bankruptcy! And his mother is on disability, which even for Fed-backed student loans is a factor for loan discharge.

Puck, thank you for the info...but to answer your question, I understood all about co-signing, but due to the fact that when i searched bankruptcy and college loans, the only info that ever came up was "its not dischargable." Never once, to this day, have i found anything that says "If you co-sign for a loan and the original loaner declares bankruptcy, the entire loan goes to the co-signer." I realized if i defaulted on payment and what not, that would happen, but ive been making my payments.

Katrina, you have no clue. Im in hell. I feel horrid that my mother is now saddled with MY 50,000$ student loan. Truthfully, i dont care if i can get them discharged, all i want is to get them back under MY name so shes off the hook.

I understand the law as to why certain loans can be discharged through co-signing. But does that mean I should have just not taken a job after college, given up my possessions which only add up to ~4k, and ruin my credit for 7 years just so I could have my 60k in private loans discharged? That could be worth it to some people which would only raise everyone else's fees and interest rates.

Honestly, I don't really see the problem. He says he made payments, and expects to have the money. So just pay it while its in her name. Your guilt itself should make you work your butt off and ensure every month that you make that payment in full and on-time.