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National Collegiate Student Loan Trust Case Barred by Florida Statute of Limitations

Great news for Florida consumers with student loans! On April 21, 2015, the Middle District of Florida, Tampa Division, Bankruptcy Court issued a ruling on behalf of our client that a National Collegiate Student Loan Trust would be barred from pursuing student loans in Florida because the five year statute of limitations had expired. In doing so, the Court entered Final Judgment in favor of our client.

However, NCSLT apparently did not like this ruling and has subsequently filed an appeal. As neither party has submitted briefs yet, the outcome of the appeal remains unknown and should be resolved in approximately 4-6 months or less.

These clients owe a devastating $161,000 in private student loans. They also owe only about $20,000 in federal loans for which payments are current in a repayment program. However, prior to hiring us, these clients were not presented with realistic payment terms from the private lender. The household income for this family of four is only $40,000 as they have two young children and the wife stays at home to care for them.

Like many, they had no idea they had accumulated so much in private student loan debt and that no programs were available to help for private student loans. We brought a case for an undue hardship in bankruptcy for them in an attempt to obtain a partial discharge and to drop the amount and payments down to something affordable. During that case, we discovered that the loans were actually past the statute of limitations both in Florida and in California (the promissory note provided that California law should apply). NCSLT argued that since the debtors could move to any state or nation at any time, and that state or nation may have a different longer statute of limitations, then it would impossible to bar the enforcement of the student loans. This is ridiculous and hopefully the appellate court will agree with the trial court’s decision here to apply Florida law.

Many people don’t realize that private student loans have statutes of limitations. But unlike federal loans, private loans have a limited period to collect the debt. A payment, no matter how small, may act to renew the statute and it would start over. So if you haven’t been able to make payments for several years, please see an attorney who is knowledgeable in the area of student loans before you make a $25 payment that would potentially ruin your best defense.

Many cases brought by NCSLT have documentary problems. These loans were securitized just like mortgages and are required to prove to the court that they have standing and ownership of the loans in order to enforce them. There are inconsistencies with the payment histories. And finally, they are often bringing cases after the statute of limitations has expired. However, if no one defends the case, if the former student defaults, then there is no one to bring these legitimate defenses to the court’s attention.

In any event, this particular case is not necessarily a guarantee of any particular outcome and if you should have private student loans, please consult with an attorney knowledgeable in this area. For further information, please see our website at: Christie D. Arkovich, P.A.
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