A growing number of young people are filing bankruptcy each year, mostly thanks to the ever increasing amounts of student debt.
More and more teenagers are taking out their own credit card, and many undergraduate students have more than one credit card with an outstanding balance on it. It is believed that the average student owes between three and four thousand dollars in credit card debt, in addition to their other student debts.
Difficulty Managing Finances for the First Time Is A Contributing Factor
Credit card companies are now marketing directly to students, and this could be a part of the problem, as the companies are not helping students manage their finances. Many students are living on their own for the first time, and have little experience managing their own money.
They find it hard to budget and keep track of their credit card purchases, and usually do not seek advice about their finances until the situation is already out of control.
Experts have found that people tend to spend more when shopping with a credit card than they do if they are spending cash. When you add in interest, late payment charges, and minimum payments, it becomes difficult for people to budget.
Many students do not realize that paying only the minimum payment barely dents a credit card balance, and don’t think about how much it is actually costing them to pay for things on their card.
Finding yourself deep in and having you consider student bankruptcy for your students loans, can make you feel as if you have graduated from the school of hard knocks. Bankruptcy is not the best solution when problems arise with the repayment of government backed student loans or loans from non-profit agencies.
These loans will not be discharged in a bankruptcy. You will still have to repay these student loans after bankruptcy.
Student loans cannot be discharged under the Bankruptcy Code under normal circumstances, but there is a loophole in government legislation that some students have seen as a way to avoid paying off student loans – the number of students filling for bankruptcy has increased dramatically in recent years.
The bankruptcy judge has the final say, and some lucky students have found judges that allow them to discharge their student loans. Even if they do not manage to get rid of their student loans, they can still apply for other loans to be discharged, and lenders have to wait until the case is decided before chasing the debt.
It is often better for a student to deal directly with a lender and attempt to settle the debt without applying for bankruptcy, as this avoids having a bankruptcy order on their credit record.