Who Sees an Attorney When They are in or Verging on Default of a Student Loan?

Interviewer: At what point can you step in with regard to a client’s student loans? When you step in what’s the typical scenario?

A Number of Attorney Campbell’s Clients are in Chapter 13 Bankruptcy, Which Offers Relief from Most Debts Other Than Private Student Loan Debt

A. Campbell: The typical scenario, unfortunately is most of the people, probably 80% of the people, are in default on a student loan debt. Some of them have gone through Chapter 13 bankruptcy. When you’re going through a Chapter 13 bankruptcy it’s great for pretty much any kind of debt, other than private student loan debt.

Private Student Loans Still Accrue Interest Even When the Borrower Is in Bankruptcy

Your private student loan debt while you’re in a Chapter 13 bankruptcy still is accruing interest, still is accruing late fees. It’s unfortunate that the Congress hasn’t addressed. If it’s a public student loan while you’re going through a Chapter 13, there’s an administrative stay.

Public School Loans Stay Interest Accrual While the Borrower Is in Bankruptcy

In other words, they’re not going to tack on late fees and keep tacking fees when you’re in a Chapter 13. They just stop everything until you’re out of the bankruptcy and then you’re back and you’re not necessarily in a worse position.

With private student loans they don’t do that and if they don’t have to do that unfortunately. I’ve had people come in who were very frustrated after their Chapter 13 and the interest is continuing to capitalize and they’re very upset;

however, that’s the way the law is unfortunately.

It’s not perfect and it definitely needs to be addressed and modified. The other group of people, most of the time they are in default on federal loans and we can usually work a way out for them.

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