Who is National Collegiate Student Loan Trust and why are they suing me?
It’s not surprising that you have never heard of National Collegiate Student Loan Trust, in fact you are probably reading this article because you have no idea who they are or why they have filed a lawsuit against you. National Collegiate Student Loan Trust in most cases has to do with a private student loan that you took out or personally guaranteed. The interesting thing is this entity isn’t a lender, servicer or guarantor of your loan. Instead, it’s a series of trusts that contain numerous private student loans packaged and sold as investment vehicles to investors. While private student loans are not dischargeable in bankruptcy, this entity may agree to a settlement of your loan for 50% or less of what you owe them if you have a lump sum available to offer due to the investors seeking to recover as much of their investment as possible. Furthermore you could also choose to fight the lawsuit and force National Collegiate Student Loan Trust to provide proof that you owe the debt by providing a promissory note signed by you or proof that the trust has standing to sue you for the debt.
I am guessing that if you are being sued by National Collegiate Student Loan Trust, at some point in your life you borrowed or co-signed a private student loan from JPMorgan Chase Bank, N.A., Charter One Bank, N.A., Wells Fargo Bank N.A., Bank of America, N.A., RBS Citizens, N.A. or Union Federal Savings Bank among others. These lenders are called loan originators since they created the loans. What you probably were not told when you signed up for the loan is that shortly after the bank lent you the money, the loan was transferred to an entity called The National Collegiate Funding LLC. This company has no function aside from hanging on to the loan until it’s ultimately transferred into the trust. This entity is called a depositor while a servicer is the company that collected the money on your private student loans and sent you a bill every month.
Did You Know That There is More Than One National Collegiate Student Loan Trust?
Yes it’s true that there are numerous National Collegiate Student Loan Trusts made up of hundreds if not thousands of private student loans packaged and sold off from the originator to the depositor and then sold to investors. Each trust is identified by a numeric code, such as National Collegiate Student Loan Trust 2007-3. Here is a sample prospectus from National Collegiate Student Loan Trust 2007-3 just to get an idea of how complex this system is.
Once the loans are transferred into a National Collegiate Student Loan Trust, bonds are sold to investors. Each bond entitles the investor to receive distributions from the trust based on the amount of money that comes in from private student loan borrowers.
The greater the percent of loans in the trust that are paid on time, the better the return on the investor’s investment. But if too many of those loans go into default, the investors don’t make very much money which opens up the door for you to settle your debt for less than the full balance of the student loan you owe or possibly challenge the validity of the loan.
What Happens Once I Default on A National Collegiate Student Loan Trust Debt?
Once you have gone delinquent on your National Collegiate Student Loan Trust debt, the operators of the trust may hire a third party debt collection company or law firm to send out collection letters or call consumers. The primary debt collection law firm hired for these loans is Patenaude & Felix. Unfortunately for National Collegiate Student Loan Trusts and many other third party debt buyers, the information that they have from major banks, the originators of the loans, only includes a spreadsheet of information with consumers information. It is very possible that National Collegiate Student Loan Trust nor Patenaude & Felix cannot produce original contracts or promissory notes signed or any proof that you actually owe on a debt or that National Collegiate Student Loan Trust has standing to collect on the debt. Further, if National Collegiate Student Loan Trust shows up on your credit report it is likely that they will not be able to validate that you owe a debt in accordance with the Fair Credit Reporting Act and therefore any negative reporting must be removed from your credit upon a request for validation of the debt.
How Should I Handle A Debt Being Collected By National Collegiate Student Loan Trust?
Now that you know who National Collegiate Student Loan Trust is, the next step is to figure out how you can deal with them. Your first contact with this company will likely be through a letter that you receive in the mail from a third party debt collector or debt collection law firm such as Patenaude & Felix indicating that they represent National Collegiate Student Loan Trust who has purchased your Student Loan and that you should contact them to make a payment on a debt that they are collecting for. If you don’t take any action then at some point it is likely you will receive or be served with a Summons and Complaint, also known as a lawsuit. These are legal documents that indicate that a lawsuit has been filed against you and you will have 20 days to respond from the date of service to avoid having a default judgment being entered against you. It is likely that your case will have been filed in the county in which you live in either the superior or district court. Also be on the look out for any case filed against you without a case number. If your case does not have a case number, you still must respond to the complaint to avoid a default judgment being entered against you. However if there is no case number you have a better chance of the law firm not pursuing the collection in the near future since they have to incur more fee’s in which to actually file your case at the court house. If anything at least filing an answer will buy you some time.
If you get a default judgment entered against you, that allows National Collegiate Student Loan Trust to garnish your wages, bank accounts or place a lien on your home. You will want to avoid this from happening at all costs. Having a judgment against you will impact your ability to settle the debt for less than the full balance and can also affect your credit scores and impact your ability to gain favorable credit in the future
How you decide to handle debt being collected by National Collegiate Student Loan Trust will be determined by your particular situation. For instance if the debt in question is for a small amount and you know you are responsible for the debt you may just want to settle your account with the company attempting to collect on the debt. Often times these debts can be settled for less than the original balance owed. Obtaining a settlement of 50% or less of the total balance on settlements is not uncommon. If a settlement isn’t an option then often times a payment plan can be obtained although the total settlement amount will probably be higher. The option to pay to have a negative item deleted on your credit may also be available but always make sure you get any settlements in writing.
Next if you have other outstanding debts including the National Collegiate Student Loan Trust debt and your debt load is over $10K then you may want to speak to an attorney regarding filing for bankruptcy. Filing for bankruptcy will stop a debt collector from collecting on a debt immediately. A Chapter 7 bankruptcy will eliminate all of your unsecured debt in most cases, while a Chapter 13 bankruptcy will give you a payment plan over 36-60 months to pay on your debts in which you may or may not have to pay the full amount back depending on your income and family size. Since National Collegiate Student Loan Trust is a student loan, this will not be discharged in bankruptcy.
If your goal is simply to buy some time in which to obtain funds to settle the debt or you want to fight the lawsuit and you have already been served with a summons and complaint then it is advisable to file an answer to the summons and complaint. The answer must be filed in the court where your law suit is and a copy sent to the law firm as well. The answer outlines all of your defenses and responses to the allegations in the complaint. Filing an answer will help you avoid a default judgment and allow for you to buy time and force the law firm to produce paperwork from the original creditor showing you owe the debt. If you do file an answer, it is likely that National Collegiate Student Loan Trust at some point in the next couple of months will file a motion for summary judgment stating that they have evidence that you owe the debt and that they should win their case. At this point the law firm would be required to actually produce such evidence. If you don’t have a valid defense to these allegations you will want to settle your case to avoid further attorney fee’s and interest being entered against you. Otherwise you have the option to continue in litigation and see if the company will produce evidence that you owe on a debt and a court will determine whether National Collegiate Student Loan Trust has standing to collect on the debt. Often times third party debt collectors cannot produce such documentation but the only way to find out for sure is to see your case to the end, often ending with a trial. If for some reason you have let a default judgment get entered against you and you need to stop a wage garnishment a bankruptcy can always be filed after the fact and any wages taken within 90 days of the bankruptcy filing may be returned to you.
If you live in Washington State and have received a letter or a legal summons and complaint from National Collegiate Student Loan Trust and have questions about it, give Symmes Law Group a call at 206-682-7975 to learn about your options.