Texas Student Loan Lawsuits

Whether or not you are ultimately sued for a defaulted student loan is largely dependent on what type of loan you have. Historically, it has been rare for the federal government to actually file a lawsuit to collect a defaulted Texas student loan. This is because the government has multiple collection tools that it may employ that do not require formal court intervention. It has been our experience, however, that these types of lawsuits are increasing. In many states, the government is turning to the office of the United States Attorney more often to pursue delinquent federal student loan borrowers.

For private student loan lenders, a lawsuit is the collection tool of choice. The “Great Recession” of 2007 – 2010 caused record consumer debt defaults in the United States. Mortgage and credit card defaults skyrocketed and made headlines throughout that era. Student loan defaults rose dramatically through this time period as well, though there weren’t nearly as many newscasts or television programs dedicated to the dilemma. What the Texas court system is seeing now is the fallout from those many student loan defaults. Texas student loan lawsuits are being filed in large numbers, and the majority of those lawsuits are being brought by private student loan lenders.

Bankruptcy is Not a Very Good Option

Bankruptcy offers great protection for lots of debt, even gambling debt in some cases – but not for student loans. In 1998, our lawmakers decided that federally funded student loans would no longer be dischargeable with the exception of the “undue hardship provision.” In 2005, Congress passed sweeping bankruptcy reform laws that make it much harder for individuals to shed student loan debt via bankruptcy. Prior to 2005, private student loans that were more than five years old were in fact dischargeable. Not now. In order to discharge private student loan debt the borrower must also now show “undue hardship.”

So how does one show undue hardship? First, the borrower must file bankruptcy. Then, the borrower must actually file a lawsuit against the student loan lender within the bankruptcy proceeding. These actions are referred to as “adversary proceedings” and they are full blown federal lawsuits. This pits the student loan debtor against the corporate lender and the lender’s well funded litigation team of lawyers and experts. The majority of student loan debtors simply cannot afford it. And, our experience has been that for those who can, the majority of the cases that do get filed are still unsuccessful.

But there is hope. Texas student loan lawsuit defense is one of our firm’s core practice areas. Once the creditor learns that you have an attorney, they must stop contacting you immediately. By getting between our client and the creditor we can immediately stop the phone calls and the harassment. This in and of itself is a huge benefit to most of our clients and offers relief almost immediately. We will also do our best to see that you never have to go to court and we will make all required court appearances on your behalf (a Defendant could be subpoenaed to appear in court but that is very rare in our experience). And, generally speaking, our firm has been very successful in negotiating settlements on terms favorable to our clients, though we cannot guarantee or promise you a result.

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