Why Student Loan Borrowers Should Be Watching This Bankruptcy Case

"When Ryan Lancaster filed for bankruptcy in 2007, he was hoping for a second chance. Instead, money he borrowed online through a division of Wells Fargo when he was a student still dogs him, more than a decade later," MarketWatch reports.

"Like many Americans, the now-38-year-old had always viewed the process of reorganizing his debts as shameful. 'The way I’m brought up, bankruptcy is the most terrible thing you could probably ever do,' he said in a recent interview. But as his debts began piling up beyond what he was earning, Lancaster learned more about the philosophical origins behind bankruptcy — the idea that consumers should have the opportunity to start over financially — and he decided to go through with it.

The process didn’t go as planned. 'That fresh start never came for me,' Lancaster said. Shortly after exiting the bankruptcy, Wells Fargo sued Lancaster in state court, attempting to collect on the money he borrowed while he was in school. The ramifications of that lawsuit, including damage to his credit, trailed Lancaster for years, making it nearly impossible for him to pursue his dream of owning his own insurance franchise or financial planning business. He ultimately settled with the bank and took on a personal loan to afford the settlement agreement — money he’s still paying off.

Now a new development in Lancaster’s case gives hope to him and other borrowers in a similar situation.

A judge ruled last month that Lancaster’s case accusing Education Financial Services, the Wells Fargo division from which Lancaster borrowed the money of improperly collecting on loans that were discharged in bankruptcy can proceed, despite the company’s request that the case stop moving forward. Though the judge is only allowing the case to continue and it’s still unclear whether the plaintiff will ultimately win, the decision allows the court to consider whether a debt the lender collected on years ago was actually discharged when the borrower filed for bankruptcy.

The ruling indicates borrowers may be able to reach back several years to recover money they paid on debts that should have been wiped away when they filed for bankruptcy."

NASFAA's "Headlines" section highlights media coverage of financial aid to help members stay up to date with the latest news. Inclusion in Today's News does not imply endorsement of the material or guarantee the accuracy of information presented.

 

Publication Date: 1/2/2018

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