Will SoFi Sue Me? Yes

SoFi sues some borrowers after they default on a personal or private student loan, but there may be time to negotiate a debt settlement or to refinance with a private lender before the lawsuit is filed.

SoFi has become a major player in the private lender space by spending heavily on marketing efforts encouraging federal student loan borrowers to refinance their higher-interest loans into a private loan with a lower interest rate. Refinancing helps you save money on interest over the life of the loan, but it can leave you stuck with a monthly bill you can’t pay.

It’s also spent heavily to grab a huge share of the personal loan market. As a result, SoFi holds a bunch of debt, most of which is paid on time.

But people’s financial situations change, and they fall behind on their monthly payments. Miss enough payments, and SoFil will charge off your loan balance and send it to a debt collector. Sometimes that’ll be a collection agency that Sofi sent the debt to see what results they could achieve. Other times, it’ll be a debt buyer that Sofi sold the loans at a discount.

Related: How to Lower Private Student Loan Payments

No matter what route the loan takes, you — and your cosigner, if any — will suffer the same consequences: collection calls and credit score damage. You won’t have to worry about SoFi garnishing your wages, taking money out of your bank account, or putting a lien on your home until it takes you to court and gets a judgment.

Related: What Happens if You Default on Private Student Loans?

From the time your loan defaults until SoFi hires a law firm to sue you, there’ll be time to try and resolve the debt.

All isn’t lost if you’ve fallen behind on your SoFi personal or private student loan payments. There are five options to choose from:

• Pay the loan balance in full.

• Negotiate a settlement.

• Refinance with a new lender.

• File bankruptcy.

• Wait for the statute of limitations to pass.

Paying the balance in full is off the table for many. If you could do that, you probably wouldn’t be worried about being sued.

Negotiating a payoff is a great option — especially if you have a lump sum. You may be able to strike a deal that lets you pay less than half of what you owe for a SoFi personal loan. When settling private student loans, you’ll typically pay a bit more — closer to 60-75%.

If you don’t have a stockpile of cash lying around, it may be possible to work out an arrangement where you put a smaller amount of money down and then enter into a repayment plan to pay the remainder over several months. The savings you’ll get with that settlement won’t be as great, but it’ll keep you out of court.

Refinancing can help — if you find a lender willing to refinance a delinquent debt. Student loan refinancing pays off your balance and gives you a new loan that may have a lower interest rate and better loan terms, depending on your personal finances and credit history.

Check with your local bank or credit union to find a debt consolidation loan with the lowest rate. Lending options for defaulted SoFi student loans are trickier. There’s only one lender I know of that provides refinancing options for delinquent or charged-off private loans: Yrefy.

Bankruptcy stops all collection attempts and any pending legal action in its tracks. Plus, it will wipe out your SoFi personal loans and credit card debt. You’ll be stuck with your private student loans, and federal loans for that matter until you file a student loan bankruptcy case.

The benefits of bankruptcy come at a steep cost to your credit score. It can take a couple of years before your score bounces back.

Waiting for the statute of limitations to expire is painful and risky. For several years afterward, your credit will suffer because of your late payments, and you’ll constantly worry that the sheriff will show up at your house to serve you with a lawsuit.

All isn’t lost if you’re sued. You’ll likely still have the opportunity to work out a settlement before a judgment is entered and the threat of wage garnishment and having money taken out of your checking account becomes real. You can also race to bankruptcy court to stop the case from moving forward.

The upside is that if you stick it out, you might walk away from the debt entirely. How often that happens is unclear. But I know your odds go up if you live outside the US.

Related: What Happens If You Leave the Country and Don’t Pay Your Student loans?

SoFi does sue borrowers to recover money owed for personal and private student loans. Before that happens, you’ll likely have a chance to work out a settlement or payment plan that keeps you out of court. If you cannot reach a deal, refinancing and bankruptcy can help keep the sheriff away. The best choice for you depends on your finances and risk tolerance.

Schedule a call with me to discuss your private student loan options. Over the years, I’ve helped hundreds of borrowers find a way out of what they believed was hopeless.

UP NEXT: SoFi Student Loan Forgiveness