If you are in your 20s or 30s and already have significant debt, you are certainly not alone. Research shows that two-thirds of millennials have long-term debt and a majority are struggling to repay it.
In addition to long-term debt, such as student loans, the Wall Street Journal reported that many millennials also face short-term debt such as credit card bills. It was also reported that many people in the 20s and 30s are reaching into their savings and retirement accounts just to get by.
If these scenarios sound familiar, you may be worried that you will never be able to get out from under the debt that is weighing you down. You may be wondering if there is some way to start fresh, perhaps by filing for bankruptcy.
The good news is that you can improve your financial situation and bankruptcy may be an option to do that. However, there are several things to know about bankruptcy before deciding to file, including:
There is more than one way to file for bankruptcy. Both Chapter 7 and Chapter 13 bankruptcy are available to consumers. Chapter 7 bankruptcy involves discharging unsecured debt, while Chapter 13 bankruptcy involves repaying most of your debts over several years' time. You can find out more about the difference between the two here.
Student loans are usually not forgivable in bankruptcy. Student loans are a major cause of debt for many millennials. Unfortunately, as we discussed in another post, student loans usually cannot be forgiven through bankruptcy. However, if you have other kinds of unsecured debt, bankruptcy could help free up cash flow for student loan payments.
Talk to a bankruptcy attorney for advice. There is only one way to know if bankruptcy is the right option for you and that is by meeting with an experienced bankruptcy lawyer in your area who can look at your specific situation and help you determine the best plan of action. You could also contact a free or low-cost credit counseling service for personalized advice.
There may be other options. Bankruptcy has serious consequences, including a negative impact on your credit report. For that reason, you will also want to consider alternatives to bankruptcy, including a debt management plan. However, be extremely cautious of so-called debt relief companies that promise to get rid of your debt but will only make your situation worse.
The most important thing to remember is that your debt doesn't have to ruin your life forever. It is possible to escape the nightmare of crushing debt, and there are honest people who can help you do just that. You just have to take the first step.