Expert: Regan Shinski - 8/30/2010

Question
My mom cosigned for a student loan for my sister and it automatically rolled over for a second term. i just found out that it was for around $8000 and now it's up to $15000. i called the government and they referred me back to the debt collector. i called the debt collector to see about resolving it and letting them know that my mom had a stroke in march and does not work, at this point he says i have to send proof of power of attorney to discuss her bill. I did, but when I looked at her funds,I have enough to maintain her current bills and medical expenses. I also get the impression that they are trying to transfer the bill to me and I'm not taking over that bill. i constantly get calls 4-6 times a day, they will call her cell phone and my work cell phone.

Answer
Hi Robert:

Your mom is in a difficult position as student loans are very difficult to eliminate.  However, in her situation she does have some options.  All of this is predicated on the fact that you are dealing with a third party collection office, not the original lender.

The first thing you can do is send a certified letter to the collection agency saying you want all future communications with them to be in writing.  Once they receive this, they are only allowed to call you one more time, say they received the letter, and inform you of their future intentions.  Any calls after that violated federal law and you could sue them for damages and statutory fines.

If your mother has any social security, disability, pension, or other similar type of benefit income, it generally is protected from garnishment or confiscation.  However, she needs to set up an account where only - and I mean ONLY - those types of funds are deposited.  Instruct the bank to note the account that it is disability, social security - whatever - type of income and should be protected from judgement enforcement.

These two steps should stop the calls and protect your mother's income.  At that point, I would send a letter to the collection agency that you are no longer power of attorney and want no further contact on this account.  You really are protected without doing this.  They can't win a lawsuit against you if you were not party to the original contract.  If you think you still need to assist your mother don't do this step but have your mother send a letter - if she is able - saying you are authorized to discuss the account but that you do not have power of attorney responsibilities.

Again, you don't really have to do these steps but they could provide additional protection if you fear you are somehow being tied to the debt.  The reality is they would have to sue you for this to affect your finances in any way.  If they do sue you, simply respond and/or show up at the court date and they will have no evidence you are a party to the original debt contract.

Finally, bankruptcy is generally not an option in student loan cases unless she can prove "undue hardship."  This is a high standard to meet but with your mother's medical condition, it may be applicable.  I am not necessarily recommending bankruptcy , only saying the only way to eliminate student debt is to pay it or qualify for discharge of that debt under the bankruptcy undue hardship clause.  

Good luck, I hope this helps.

Regan