Collapse of a money lending company

Question

According to Businessinsider, Nelnet is having massive layoffs and apparently is collapsing.

If the actual company holding the debt has its own layoffs, and can't file lawsuits or do anything, does the debt run statute of limitations and disappear?

Answer 1

I find the "is collapsing" statement troubling. Companies grow, shrink, and restructure all the time. Nelnet might be coming apart, or somebody might be trying to generate clicks for a news story.

The normal situation, when a company goes into bankrupcty proceedings, is that a trustee tries to recover as much of the assets as possible to pay out creditors. This would suggest an increased, not decreased, attempt to collect repayments.

Answer 2

The debt doesn't go away, it just will change hands.

Debts are a commodity that can be sold. And in a bankruptcy, debts owed to a company are often sold at a loss to generate revenue to cover the obligations of the bankrupt party.

In fact, even perfectly healthy companies sell off debts all the time - using the term "sending it to collections" usually: they often just sell the title to the debt to a separate collections agency.

Example

Alice borrows 200 bucks from Bob. The next day, Bob suddenly needs money and sells the outstanding debt to Charly for 100 bucks. Alice now owes 200 bucks to Charley.

Depending on the contract, Bob and/or Charley need to inform Alice that she needs to pay Charley in the future to settle the debt.

If Alice never pays Charley, Charley can now sue Alice to pay up.

Conclusion

So, if Nelnet goes bankrupt and is not just restructuring, then very much asuredly several other companies will buy all the outstanding loans and send the new payment information to their suddenly acquired customers - and start to collect payments.