– Chris H.
Steve Rhode, the Get Out of Debt Guy, responds…
This is a classic outcome when people are unfamiliar with the debt settlement process. In your case, it sounds like they did something called a cosigner release.
I’ve seen similar situations where, for only a few thousand dollars more, the lender would’ve settled the entire debt for both parties. However, the consumer has to ask the right questions to get that kind of deal. If you don’t, the primary borrower may still be on the hook for the remaining balance once the cosigner is released from their obligation.
If you feel the paperwork reflects that the entire loan balance was settled, then I would highly recommend you contact an attorney. Make sure they are licensed in your state and ask them to review the paperwork. If you don’t have money to hire a lawyer, find a local Legal Aid
Society to get free legal advice.
Otherwise, it sounds like this was a student loan in your wife’s name where her father guaranteed payment on the loan as a cosigner. He subsequently agreed to settle his part of the obligation using a cosigner release settlement. This left your wife on the hook.
If this is correct, it leaves your wife on the hook for the remaining balance minus the amount paid on the cosigner release.
On a private student loan a cosigner can be released from their responsibility to repay a debt once they meet certain requirements for repayment that the lender sets forth.
