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If you’ve been following along with the mess that is Tuition Answer private student loans serviced by Navient, there is an update.
In 2016 I wrote at length about the misinformation Navient was giving consumers about Tuition Answer private student loans.
As I said in this post, Navient was telling investors the loans might not be protected in bankruptcy but continued to collect on them after consumers filed for bankruptcy. That felt like an oops way back then.
In March 2017, an Adversary Proceeding was filed, Homaidan v. Sallie Mae.
In the initial complaint filed, the Plaintiffs said, “For the last ten years, SLM Corporation, Sallie Mae. Inc., Navient Solutions LLC and Navient Credit Finance Corporation (“Defendants”) have been engaged in a massive effort to defraud student debtors and subvert the orderly working of the bankruptcy courts. Specifically, Defendants have been originating and servicing dischargeable consumer loans and disguising them as non-dischargeable student loans. Defendants have done this in order to discourage debtors from seeking their constitutional right to relief under Title 11 of the Bankruptcy Code and to allow creditors to continue to collect on discharged loans after a debtor’s bankruptcy. In order to effectuate this illegality, Defendants have appropriated a legal presumption for a class of debt that they know is not entitled to that presumption, thereby using the authority of the bankruptcy courts to cloak their fraud in the color of law and escape detection. Defendants are willfully and maliciously engaged in a pattern and practice that they know subverts the proper workings of the bankruptcy process. Plaintiff brings this action to enforce his rights and the rights of those similarly situated under the law.” – Source
So let’s flash forward to now. On October 17, 2022 the United States Bankruptcy Court Judge ruled “Navient is restrained and enjoined from taking any acts to collect on Tuition Answer Loans held by the Plaintiffs and the Putative Class Members, as the class is described in the Amended Complaint, that exceed the cost of attendance as defined by Internal Revenue Code § 221(d), and that have an outstanding balance subject to collection.
In view of the pendency of this Court’s Temporary Restraining Order, which was entered on July 6, 2022, and has been in effect since September 6, 2022, Navient has had reasonable and sufficient time to implement compliance measures, and this Memorandum Decision and the accompanying order shall be effective immediately.” – Source
The Judge also said, “The Plaintiffs have shown a likelihood of success on the merits of their claim that their private Tuition Answer Loans that exceed the cost of attendance do not meet the nondischargeability requirements of Bankruptcy Code Section 523(a)(8)(B), and are therefore within the scope of their bankruptcy discharges. And the Plaintiffs have shown a likelihood of success on the merits of their claim that Navient received notice of their bankruptcy discharges, and intended the acts that violated the discharge to collect on these discharged debts – that is, that Navient has violated the statutory bankruptcy discharge injunction as to the Plaintiffs and the Putative Class Members.”
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