Heard this sad story from a US-returned friend through
this club I have joined. If you have any legal advice,
pls help Shakit, your fellow Nepali mate. I want to keep
his name and other identifications anonymous, but pls
this is a true story.

Background Info:

Call him Shakti (name changed), 27 years old. Shakti did
his undergraduate schooling in the American midwest from
a four-year liberal arts college - where he took out USD
3000 per year as student loans against a promisory note
which he had to sign at the beginning of each year. The
rest of his costs were in the form of scholarship, except
for that loan part. He graduated in 1999...didn't work in
USA, and returned to Nepal, by which time he owed the
college USD 12,000, with an 8% interest rate. Now the
loan has ballooned owing to compounded interest rates.
He's from a lower middle class family, and with average
Nepali salary (NRs 15,000/month) he is unable to back all
those loans. And this is where his worry starts. He posed
me the following questions, to which I have no straight
answers. If you can help him ease his mind, pls answer
the following so that I can forward this to him.

Key questions:

1) When Shakti applied for financial aid, he had to
declare his family assets, and the form was signed by his
father. His home address is also on the form...which
means he is still traceable. When he signed the promisory
note to take student loans, he was already an adult, and
for the best of his knowledge the promisory note was not
signed with his family assets as collateral. Besides,
since he doesn't own those family assets (his parents own
them), he can't put them as collateral. It was probably
signed with the understanding that he would eventually
pay back the loan from his own earnings - but with his
salaries in Nepal (NRs 12,000/month) that is not
possible. He has only saved up to six lakhs till now -
less than the outstanding loans. Now the question is: can
the loan collection agency based in US (assuming that the
College sold his debt to the agency) come after his
family assets? His father's signature is not on the
promisory note - but only on the financial aid form. His
family assets are under his parents' name - basically
some land and house - and he has four other siblings who
will some day inherit those. Can the loan collection
agency claim the family assets - even though they are not
under Shakti's name and the promisory note was not signed
against the family assets as collaterall? More
importantly, can the loan collection agency through their
contact with local bank in Nepal penalise his parents
(who own the assets), and his siblings (who will divvy up
the assets as inheritance pies) for the fault (default)
that is solely his doing????? His parents do not work -
but live off the rent by renting their only house. They
are old, and may be rendered homeless and incomeless in
their old age.

2) Although based in Nepal, can he file personal
bankruptcy in the US or Nepal so as to keep the wolves at
bay? Would declaring bankruptcy save his family assets?
If so, what would be the procedures?

3) If the collection agency sells the debt to a bank in
his hometown - and the latter decides to foreclose on his
parents' home, can they legally do it?

4) Has any US-or-West-returned Nepali student had this
problem or how has he or she dealt with it? The reality
is if you take out loans, and do not decide to work in
USA, it is almost impossible (like running to stand still
or going a little backward) to pay back the loans. As
this could happen, has it happened?

5) Can you recommend any American-Nepali lawyers based in
USA or good trustworthy Nepali lawyers based in Kathmandu
that he can consult?

6) Do colleges grant debt-forgiveness?

Shakti today is going through tough times - this is
affecting his social life, professional life, and
everything.

What would be the best course for Shakti to follow - to
protect his parents' property, which is not legally his
yet?

Helping him a bit in my own way as a Good Samaritan.

This could affect any Nepali students studying in USA on
student loans, so I thought this was the best place to
post the above queries.

Thanks,

Karmapa
-----------
Pls post your responses in this thread and I will share
these with him. I am not a legal pundit - and when it
comes to legal matters, I'm zero, zilch.

Moreover, as I write a regular column (usually once every two-
weeks) for a Weekly English magazine that comes out of Kathmandu,
I want to do a story on this - once I have all the dope. As these
are the days every Ram, Shyam and Ghanshyam are heading for the
USA for higher education - they should be reminded aware of risks
of default on student loans, something they discount in their
excitement to study in the USA. Thank you once again.

p.s.: Oops above I quote two different figures for his monthly
salary - it is actually around NRs 12,000/month. Shakti doesn't have
property (house land) under his own name: he lives on rent.

First of all, how did he manage to get loan in the US? Was he a US permanent resident? Since he went back to Nepal, I am assuming he was a foreign student in this country. If he was a foreign student, I am truly amazed he got the loan from a US school in the first place!

Lender goes after the assets of borrower only, even if he was in the US as a US resident. They have no legal access to parents or any other siblings asset, unless they were co-signer for the loan.

But of course, I am no lawyer! It is my plain and simple common sense.

Dear Madhesi,

Thanks for your info. No Sakti is not a US permanent resident. Yes he was a foreign (interantional student) from Nepal. His tuition, board were mostly covered for 4 years by college in the form of scholarship, but as it was mostly partial scholarship (say upto 90% covered free of charge), he had to take out student loans (USD 3000/yr). This was given - do not ask me how. While the family assets were declared in the Financial Aid Form since the scholarship offered was needs-based and they needed that info to assess his scholarship needs, his father signed the Financial Aid form. However, for loans only Shakti signed the promissory note (promising to pay that amount after graduating) - and not his father or mother or guardian or anyone else. No mention of collateral was on the promissory note. Since the family assets are legally under Shakti's parents' name (not his), he couldn't have signed the promisory note against the family assets. I mean can Hari sign a promissory note against his uncle's assets, for instance? Even if he did say (playing the worst case scenario here), it would still need his father's co-signature, which isn't there in the promisory note. Which means it looks as if the college - or the loan collection agency to which the college has sold his debt - can only go after Shakti's property, which he doesn't have (he lives on rent, he has not bought property or house under his own name yet, as he is busy saving up money to do exactly that - but which he may instead end up servicing his debt, if the legality of it can be established.

Also the wind is that the loan collection agency is illegal in Nepal - as we have different laws in Nepal. It is possible that the US-based loan collection agency may contact a bank in Shakti's hometown to foreclose on his parents' home (may be illegal given the above scenario) and other family assets. Apparently the US-based loan collection agency may strike some loan recovery deals with some bank in Shakti's hometown. This is possible to do in this day and age of ITCs and the Internet.

Again my question is what should Shakti do to prevent his parents' home going on auction - the legality of it, in view of the scenario I above discussed above.

Madeshi, like you, I would tend to think that the bank can go only after the borrower's property (Shaktis' property), not his parents' property (which in theory also belongs to Shakti's siblings potential inheritanc pies) and this he doesn't have, he only has savings in his bank account. Can the bank penalise the whole family (parents, siblings) for the wrongdoing of or defaulting by Shakti?

Any legal counsel?

Frankly, I do not think US lender or collection agency has right to go to Nepal to collect loan from Shakti, let alone from his parents. There are hundreds of thousands of US students with school loans who never paid their loans - simply because not all students turn out to be successful enough to pay off their Huge Loan! I never heard school going after parents asset. In some cases, if it was a federal loan, IRS withheld income tax refunds of those students in lieu of loan payment causing shockingly embarassment to those borrowers!

In simple American English, that school "screwed" itself lending money to a foreign student. I wish you disclose that school so that all Nepalese go their and start applying for loans! I bet that school learnt its lesson already and will never repeat that practice again.

As Wakil suggested, filing bankruptcy may be an option, but that will cost money too! Bankruptcy lawyers are not cheap either.

My best informal and free advice is what Wakil Saab suggested. Keep Quite and go on with your life! It may be immoral .. afterall school trusted this guy .. he got almost free education in the US, but given the circumstances, what else he can do? I would strongly advise to pay off the loan, but that is not the purose of your question!

Good Luck! Again: I am not a lawyer .. so typical disclaimer goes along with my post!

Friend,

Sounds like the loan was given to the student by the university. That is a common practice in some schools. I would write a letter to the school telling the school that you will not be able to repay the school now. Bascially tell them you can't repay the loan for now and maybe in the future you will be able to pay if you make the money. I wouldn't worry about it. Those loans are basically grants. Most American's make good money after school so that they are able to repay it. I would also thank the school for all their help.

Regards