Young people in their early 20s, many of whom are students, are filing for bankruptcy at a very fast rate. Students going bankrupt seems to be a growing problem, and recent polls suggest that most teenagers younger than 19 have at least one credit card of their own. Also, two-thirds of first-year college students are said to have at least one open credit card account, and it is thought that the average student who graduates owes between $3,000 and $4,000 in credit card debt and other debts.
Managing money for the first time could be a reason why a student doesn't pay their bills.
More and more college students are being offered credit cards. This has led some states to pass laws that limit credit card solicitation to college students, and recent bankruptcy reforms are also trying to solve the problem of students going bankrupt. Students and bankruptcy could be a big problem because college students are learning to live alone and handle their own money for the first time. Because of this, it can be hard for them to keep track of what they buy with their credit cards.
Experts say that people are more likely to shop with credit cards than with cash. When interest, late fees, and rising minimum payments are taken into account, it makes it hard to manage money, which leads to more bankruptcies and a growing number of students doing this.
When a student goes bankrupt or doesn't pay back student loans, it can feel like he or she just got out of the school of hard knocks. Students who don't want to pay back government-backed student loans or loans from non-profit organisations can't get out of paying them back by filing for bankruptcy. These loans are not forgiven in bankruptcy, so they have to be paid back. However, if a student can prove (which is hard to do) that paying back the loan would cause a lot of trouble, the loan can be cancelled without having to be paid back.
Under normal circumstances, student loans can't be wiped out under any part of the Bankruptcy Code. By taking advantage of loopholes in government laws, bankruptcy seems to give students a way out of paying back their student loans, and the number of students who have used bankruptcy to avoid paying back their debts has risen dramatically over the past few years.
In the end, it's up to the bankruptcy judge to decide, and if the student is lucky, the judge may let him or her get rid of the loan by filing for bankruptcy. Lenders can't send bills to a student who has filed for bankruptcy either. They have to wait until the case is over. Most of the time, it's better for the student to talk to the lender directly and find a way to settle the debt that works for both of them than to file for bankruptcy to avoid paying.
