Can I Be Sued for Not Paying a Student Loan?

canstockphoto5621290When it comes to student loan debt, borrowers are used to being told that their wages can be garnished if the loan goes into default. This is true if the educational loan is federally guaranteed.  It’s called an Administrative Wage Garnishment, and the Department of Education can go straight to your employer and start collecting 15% of your disposable income. In this case, there would be no reason for the creditor to file a lawsuit.

But if the student loan is a private student loan, not federally-guaranteed, the creditor must file a lawsuit and obtain a judgment against you before getting an order to garnish your wages. You are supposed to be served a copy of the summons and complaint in the lawsuit before judgment is entered.

However, be aware that many people are named in lawsuits and do not get proper notice of these lawsuits.

Recently I have been getting calls from people who first find out about a lawsuit after a judgment has already been entered.  Process servers are filing declarations claiming they served someone who was actually out of town, or a person who had moved from that address years before.

The lawsuit must be filed in the county of your residence, but don’t count on the debt collector filing the lawsuit in the proper county, especially if you have moved in the last couple of years, or if you are a co-signor.

If you are served or otherwise get notice of the lawsuit, act quickly to respond in writing and preserve your rights to defend against the case. Do not assume that there is no defense. In reality, there usually are good defenses! Much of private student loan debt and credit card debt is sold to “debt buyers” who may not be able to produce documents showing their right to collect the debt. If you are being sued, you have the right to force the creditor to prove its right to collect the debt against you.

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