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My husband went through bankruptcy a couple years ago and when he was complete his private student loan lender called and arranged for a payment he could afford. My husband paid everything on time and occasionally the bank would call and ask if he could up the payment but that it was up to him. Recently we found out the bank is reporting the loans on his credit score as a charge off. The bank informed my husband that the money they recieved from the trustee during his bankruptcy was not enough to cover the interest which caused the loans to be charged off. My questions is how can this be? I thought that the point of bankruptcy is to erase bad credit reporting and in the case of student loans I thought they should have gone into defferment during his bankruptcy and once he was out resume the payments. Is there anything that can be done to get these loans in good standing and is what they are doing ok? THe only solution the bank offered was to pay in full and we can't do that
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Bankruptcy and credit reports are not completely related. Credit Reports are governed by the Fair Debt Reporting Act. It provides some protection for consumers such as the ability to get a free credit report once a year, dispute debt, and have bad marks removed after a period of time. But, other than that, what a creditor reports to a bureau is not related to your bankruptcy.
Regarding student loans, their collection is stayed pending the case as are most debts, but the debt is still owed. Accordingly, they can charge interest and there is no deferment. You were likely not paying any interest on the debt in the bankruptcy, so they could add that on.
You could file another bankruptcy to pay the balance of the student loan claim.
Answered on Apr 23rd, 2013 at 3:28 PM