Student Loan and the school was bought out....

(Sacramento, CA)

I was attending a trade school and needed to take time off to save money. I informed the school that I was going to just take a break and return in 3 months. One week later, I was informed that I would not be able to return due to the school being bought out and shut down. All who were already attending would be able to complete but because they considered me a "drop-out", I wasn't given the option.

My mother co-signed on the loan and the debt collectors are threatening to garnish her 401k. 1) Is that legal? 2) Will bankruptcy eliminate this kind of debt (Sallie Mae gave me the loan) and 3) Will Bankruptcy disrupt my mothers credit?

Reply from DebtCollectionAnswers.com:

What a mess!

First of all, you may be eligible for student loan cancellation. One of the criteria for student loan cancellation is "Closed School Discharge. If the college closed while you were in attendance or up to 90 days after you withdrew."

We are also concerned about the collector threatening to take your mother's 401(k). Retirement funds are typically safe from creditors.

(It's nearly impossible to discharge student loans in bankruptcy, by the way, and she might still be on the hook for them.)

Student loans are really a specialty area that we cannot provide additional advice about. We recommend you visit:

Finaid.com
StudentLoanJustice.org