I consigned on 2 student loans for my sister son. He has graduated college, I have paid off one of the loans and currently in the process of paying off the second one. The current loan has a balance of $7300. The paid off loan was $6K.
The answer is it depends. For example, the practice area shown is bankruptcy. If your sister and her son file for relief under chapter 7 bankruptcy code, they did not discharge their obligation to pay the student loans to the student loan lender. However, the did discharge the obligation to you as the guarantor. A discharge in bankruptcy discharges all obligations except certain debts identified under section 523(a) of the Bankruptcy Code. There is no exception that states that a debt that was nondischargeable is also nondischargeable to a guarantor of that debt. The only exception that applies to all debt are the exceptions that make fraudulently obtained debt nondischargeable, debt that was incurred because of misrepresentations made by the debtor in obtaining a particular debt and debt that resulted from willful and malicious actions of the debtor.
If your sister and/or her son have not filed for relief under the Bankruptcy Code, then under just about every state law, you would have the right to file suit against either or both of them and would likely prevail in your lawsuit, at least as to your sister's son. If you win that lawsuit you would be granted a judgment. Perhaps the more difficult problem is collecting under a judgment before and individual files for relief under the Bankruptcy Code.
Answers and comments provided are for general discussion only. My comments are not to be considered legal advice and they do not create an attorney-client relationship.
The real question is what contract existed between you and whether it has been breached and if so does she and he have a statute of limitations defense to any such lawsuit as well as what states laws govern such possible contract. Whether any agreement was in writing versus an oral agreement also may affect that ability! I would meet with an attorney in IN to go through those issues.
Finally, if you do sue obviously there will be more of a falling out than there already exists between you so you have to weight the strengths of the lawsuit vs whether it is important to try to strengthen any family ties. And if you sue, what if they file bankruptcy and Dicharge it?
If you cosigned, you signed a document where you agreed to pay the debt. You are just as liable for the debt as the person who went to the school.
Presumably you had a side agreement with your nephew that he would actually pay the loan not you. If you go into court to make that argument, you would be admitting, in court, that you never intended what you promised the creditor in the loan agreement. So you would be admitting to having committed fraud on the creditor. Seems like a bad idea.
Attorney Jay Perez is a Partner at Perez & Perez. Attorney Perez manages offices in Indianapolis and Lafayette Indiana. Attorney Perez is licensed to practice before the Supreme Court of Indiana, Federal District Court for the Northern District of Indiana, and the Federal District Court for the Southern District of Indiana. The private law firm of Perez & Perez is a debt relief agency helping people to file for bankruptcy relief under the bankruptcy code. Answers given on this forum are not intended as legal advice. You are strongly encouraged to speak to your attorney about your specific situation prior to taking any action.
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