Bankruptcy and Student Loans

devon_lad · 6 March 2018 at 4:23PM

I had to file for bankruptcy back in 2003 after a business failure. At the time I included my student loan in the bankruptcy petition.

I believe since this time the laws have been tightened so that it is not possible to write off student loans.

However, many years after forgetting about all this...

I'm currently moving house and there's a problem with my mortgage application due to my credit score. Turns out that in the last week (good timing) Link Financial Outsourcing have registered a default on my credit file for not paying my student loan. The actually default date is 2 years ago.

This is the first I've heard about my student loan since 2003.

Some quick googling reveals that payment cannot be enforced as the loan was pre-1998.

But this is actually not my main concern. My concern is there's now a default on my credit file that'll be hanging round for 6 years whether I pay or not - stopping me from getting a mortgage.

So anybody know if a 2003 bankruptcy would cover a 1996 student loan?

And if so, is there enough of an argument to get the default removed?

Thanks

devon_lad · 6 March 2018 at 6:07PM

Managed to find some information on this.

A debt in respect of a student loan (see paragraph 40.92) is not released on discharge where the bankruptcy order was made on or after 1 September 2004.! This is provided for in legislation [note 24] other than the insolvency legislation.

And also

(2)!In England and Wales—
(a)any sum payable to an eligible student by way of a student loan which the eligible student receives or is entitled to receive after the commencement of that person’s bankruptcy, will not be treated as part of the bankrupt’s estate or claimed for the bankrupt’s estate under section 307 or 310 of the Insolvency Act 1986(2), whether the entitlement arises before or after the commencement of the bankruptcy; and
(b)any debt or liability to which that person is or may become subject in respect of any sum payable to an eligible student by way of a student loan will not be included in that person’s bankruptcy debts when the person receives or is entitled to receive that sum–
(i)in the case of a bankruptcy commencing before 1 September 2004, after the commencement of the bankruptcy; or
(ii)in the case of a bankruptcy commencing on or after 1 September 2004, before or after the commencement of the bankruptcy.

I'm no lawyer - but that to me says the student loan liability was discharged with the bankruptcy of 2003.

iolanthe07 · 7 March 2018 at 6:03PM

I'm no lawyer - but that to me says the student loan liability was discharged with the bankruptcy of 2003.

You may well be right, but perhaps a default can still be lodged even if the debt cannot be enforced. You may need professional advice on this.

devon_lad · 13 March 2018 at 10:38AM

Have spoken to solicitor, and they have confirmed that this debt would have been discharged with the bankruptcy.

However, to pursue this they want £400 up front, at which point they'll be able to tell me how much it's likely to cost in total to resolve. Could be more than the debt itself.

Bit annoying.

National_Debtline · 14 March 2018 at 12:00PM

Hi devon_lad

You don't need to pay a solicitor to help you with this. As you were made bankrupt before 2004 you are correct that your student loan was provable and should have been written off. Your next step is to complain to Link Financial with details of your bankruptcy and a request to remove the default.

It's a good idea to also inform the Insolvency Service office that dealt with your bankruptcy and the Student Loans Company (SLC). If you can't resolve the matter this way you can take your complaint on to the Financial Ombudsman Service (FOS) and the Information Commissioner's Office (ICO). The whole process is free and should get the matter resolved.

Susie
@natdebtline

devon_lad · 14 March 2018 at 12:10PM

Thanks for this. Yes, I figured I could probably do the same myself. The reason for engaging the solicitor is that we're right in the middle of a house purchase - lender wants to see some firm proof that this is an invalid default notice - so solicitor is needed to verify my story in the short term.

National_Debtline · 14 March 2018 at 2:47PM

Hi there again

Have you told the mortgage lender that the default is invalid because the student loan was included in your bankruptcy? If they are not already aware of the bankruptcy it's probably not something you want to bring up. However, if they do know about it, it's a fact that you can't be held liable for the debt and therefore the default should never have been issued.

I appreciate there is an element of urgency so it will of course be up to you whether to pay the solicitor to help you. It may be worth calling Link Financial to see if it's something that can be quickly resolved directly with them. Although even if they remove the default, your credit file is only updated once per month.

Susie
@natdebtline

sadcaptain · 19 August 2018 at 8:23PM

Hi devon_lad, sorry to drag up an old thread. did you resolve this? I'm in pretty much exactly the same situation..

devon_lad · 20 August 2018 at 8:10AM

sadcaptain - the mortgage ended up falling through. We had to go a "specialist" lender because of the default. While they accepted the situation with the default, we fell down on compliance. Some of our deposit had come from a foreign property sale - bad timing with the new money laundering rules that came in last year.

So ended up costing just over £3k - had to change solicitors half way through as new lender didn't accept current solicitor.

Had no response from Link through all this - although Experian removed the default because they also hadn't heard back from Link.

Decided to take them to court to get money back. They claimed never to have received any previous correspondence and threatened to sue me for THEIR expenses!

Anyway, long story short....I didn't blink....and they settled out of court.

Lost the house, but found another - and going through high street lender now - all sorted, no issue with compliance either.

sadcaptain · 20 August 2018 at 10:35AM

wow.
Thanks for replying. Thankfully i'm not yet at the applying for a mortgage stage but will be soon, thats why i was looking at my credit reports. I can't believe they basically ruined your chance of a mortgage and cost you 3k with their shady practices - and chose to not even acknowledge your complaint!

I've fired off a (recorded delivery) letter to link today demanding they remove the default. Hopefully this will get sorted before I need to apply for a mortgage. Something tells me it won't be an easy ride though

15 years of being careful and rebuilding my credit since my BR and they just come along and do this for a 20yr old written off debt! :mad:

broken_man · 17 December 2018 at 6:28PM

For anyone who has to deal with LINK FINANCIAL regarding a Student Loan that should've been included in Bankruptcy pre July 2004, here is some contact information. Remember to send any correspondence via Recorded Delivery.

Link Financial (Honours Trustee Ltd)
PO Box 246
CAERPHILLY
CF83 9FA

I called them and was transferred to someone in their legal department. They asked me to send confirmation of my Bankruptcy so that they could update their records and my credit file. Just to be sure, I sent them confirmation of my Bankruptcy from the Insolvency Service, my Discharge notification and also a list of my creditors included in my Bankruptcy (clearly showing my Student Loan was included).

Fortunately I still had correspondence from the Insolvency Service regarding my Bankruptcy, though I had to call them to request a copy of my Discharge date. My experience of dealing with the Insolvency Service has been very poor. I've asked them several times to investigate this issue and with no luck. They say they will call back, but fail to do so, and an email I sent to their aftercare team detailing the problem with Link Financial was never replied to.

Update: Link Financial removed the negative marker from my credit file at Call Credit/Noddle within two weeks. However, I never received any written confirmation of this in the post. So don't expect any correspondence from them if and when they remove any negative markers.

Bankruptcy and Student Loans

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