A consumer recently contacted us stating that they had a National Collegiate
Student Loan trust defaulted loan. The amount was about $116,000. The
loan had been in default already as there had been about 7 months of non-payment.
The collection law firm of Weltman Weinberg and Reis were attempting to
collect on the debt and were asking for ridiculously high payments of
over $1,000 a month. We were retained to achieve a settlement substantially
reducing the amount of debt. Shortly, after we were retained, National
Collegiate decided to retain Forster and Garbus, a New York debt collection
law firm to sue our client on this debt.
The fact that National Collegiate decided to move the loan and initiate
a lawsuit was not that strange. This was a loan with a high debt amount
and collection efforts with Weltman Weinberg and Reis were a failure.
In this case the client's parent who was a co-signer on the loan was
a partial owner of a property. Whenever there is a property involved,
we have seen a natural spike in initiated lawsuits. If National Collegiate
were able to obtain a default judgment against the consumer, then they
would be able to place a lien for the $116,000 on their home. This amount
would then grow with judgment interest at 9% annually. Thus, if the co-signer
wanted to sell their home after five years they would have a big issue
as the first $170,000 of sale proceeds or so would go to National Collegiate Trust.
On the other hand a lawsuit against a consumer often means that a lower
negotiated settlement is likely. When these lawsuits are initiated the
cases are often handled by Forster and Garbus a firm we defend against
on a daily basis. For us, it is quicker and easier to negotiate a settlement
with them as opposed to a random collection agency or Weltman Weinberg
and Reis. The reason is the likely fees associated with litigation that
they would rather not spend as well as the risk involved in losing a protracted
battle in court. In this particular case we were able to reach a fantastic
settlement of $30,000 off of the $116,000 due to these factors. That is
a reduction of 75%.