Dismissal of Creditor Lawsuits

There have been recent news reports about the dismissal of several student loan collection lawsuits filed by an entity that owns most of the country’s private student loan debt. The dismissal of the lawsuits has been primarily because the entity suing the student loan borrowers could not prove that it owned the loans in question. This has drawn comparisons to the mortgage crisis and the inability of the banks to prove they owned the loans they were trying to foreclose on.

In many cases, the dismissal of the private student loan lawsuits means that the entity trying to collect the loan cannot continue its collection efforts. However, a judge does not always dismiss a case in such a way that the loan provider can never return to court once the proper paperwork has been found. In cases where the court dismisses the case in such a way that it can be reinstated, the loan provider can still pursue the borrower for repayment later on.

In addition, it is important for borrowers to note that the dismissal of a lawsuit because a creditor does not have the proper paperwork ends the lawsuit, but does not end the negative effects of not paying the loan. By the time the creditor files the lawsuit, chances are that the loan is already reported to the credit bureaus as being in default. The borrower’s credit is already affected negatively by this report.

The dismissed lawsuit does not forgive or cancel the debt owed. The borrower still owns the loan; the dismissal of the lawsuit just means that in most cases the creditor cannot collect on the debt owed. This is why it can be dangerous for a person who owes a debt to purposefully default and hope that the creditor will not be able to prove ownership of the loan. If a borrower is experiencing financial hardship, and no other defenses apply to challenge repayment of the debt, it is best to negotiate a settlement with the creditor if possible.

Dismissal of a loan under the circumstances described in the private student loan cases only occurs if a borrower answers the lawsuit filed by the creditor. If the borrower receives notice of a lawsuit filed by a creditor to collect a debt, and purposefully ignores it, it only makes things worse. The creditor in a situation where the borrower does not respond to the lawsuit can get a default judgement. This default judgment allows the creditor to collect on the loan by taking actions such as wage garnishment. Even if the creditor could not prove it owned the loan, in a situation where the person being sued does not respond to the lawsuit, the creditor still wins.

Contact Us for Legal Assistance

If you are being sued by a creditor, it is important that you file a response to the lawsuit within the time required under Pennsylvania law. In order to ensure that you assert the right defenses against a creditor lawsuit, you need to contact an experienced attorney as soon as you receive notice of the lawsuit. For more information on how to handle debt collection lawsuits, contact Louis S. Schwartz and his team at ConsumerLaw Pa.com to speak to a debt collector abuse attorney today.

Resources:

nytimes.com/2017/07/17/business/dealbook/student-loan-debt-collection.html?mcubz=1

nytimes.com/2009/10/25/business/economy/25gret.html?mcubz=1

pacode.com/secure/data/231/chapter1000/chap1000toc.html#1026.