If you feel like you're the only Millennial with financial problems, know you're not alone. In fact, 42 percent of Millennials say that debt is their "biggest financial concern". Additionally, half of college grads still rely on their family for financial support.
Not exactly a pretty set of numbers, huh?
Take a deep breath, and take a closer, more honest look at your finances. Let's start with your credit report.
What's a Credit Report?
A credit report is a snapshot of your debt at a certain point in time. It states how much debt you have, how often you pay this debt on time, the names of the creditors collecting your debt, the amount of debt past due, etc. (See sample credit report here.) This report is compiled by the Big 3 credit bureaus, namely Equifax, Experian and TransUnion.
To get a complete picture of your debt, it's best to get a credit report from all three. Each gathers credit information from different sources so they're bound to produce conflicting reports. You'd probably want to take the most conservative view on your report, because it's the basis for the number that'll make or break your credit standing: your credit score.
What's a Credit Score?
If a creditor wants to check whether you're "credit-worthy" or not, the first thing they'll look at is your credit score. This score is calculated from the following information on your credit report:
- History of payments
- Type of credit
- Total money owed
- New credit
- Credit history length
How Can I Improve My Credit Score?
There's no magical trick that'll wipe out your debt overnight, but you can try these tips on for size:
- Pay off your short-term debts first. These may seem small, but those nasty little buggers known as "interest" can pile up over time and do a number (no pun intended) on your bank account. If you can eliminate credit card debt -- or any short-term debts -- as soon as possible, you'll find it much easier to take on the long-term ones.
- Make an expense report. Take all your receipts, invoices and the like from previous months, and make a report. Tools like excel sheets or Google Docs help to organize your financial information.
- Create a budget. From your expense report, decide what you can cut or eliminate. To help you figure out an upper limit for your expenses, deduct your target monthly savings from your monthly income. If the resulting number is too low for you, you have two choices: lower your target monthly savings, or cut down your average monthly expenses.
- Lower monthly expenses. Managing debt when household expenses are through the roof can seem like an impossible task. Take a close look at your monthly bills and see what you can cut. Lose the cable and switch to Netflix. Check out what type of discounts you can apply to your car insurance. Many providers offer deep discounts for being a good driver or keeping your miles low. By keeping your monthly expenses as low as possible, you can apply those savings toward bringing down your debt.
Keep at It
Don't be discouraged if you're not seeing immediate, significant results to your efforts to improve your credit standing. Having a patient mindset and paying your debts on time is the key to turning your credit around.
I've been too loose with my money. This week I bought a new bike, made accommodations for a trip to Disneyland and spent more money on dinners out than I do on an entire month of groceries. What's turning my typical frugality into splurging? I'm getting my student loan refund on Thursday! While in the back of my mind I know that I will have to repay the $2000, another part of me is saying, "Woo hoo! I'm rich and I can finally experience the good life."
Luckily, student loans often sport a deferred interest at a low rate. However, this is not the case if you turn to banks or payday lenders for the same "fix."
I am not immune to the thrill of instant cash, and I'm betting many aren't either. So, why is the idea of getting money now so exciting to us, and how do many lenders use it to their advantage? Let's explore.
"Time discounting" is what psychologists call the phenomenon that takes place in our brain regarding money that will arrive in the future, whether in April or next week, that makes the money seem less valuable. In layman's terms this means that people put more stock in immediate rewards than in ones that will come down the road, even if they have a guarantee that they will show up. For example, if I knew my student loans didn't kick in until April, I would be a lot more careful about sticking to my budget.
Even simpler, though, it means you're likely to grab a $200 payday loan now instead of waiting a month to get a $250 paycheck. Your brain chooses to ignore that astronomical interest rate until it rears its ugly head on the top of the bill you have to pay. The favor goes to that which is immediate.
Why are some people less susceptible to offers of instant cash than others?
The answer may be in their prefrontal cortex: the part of the brain that processes executive thinking, including dwelling on the future consequences of decisions we make today. When we are under stress -- such as when we have bill collectors breathing down our necks, or when it's the first week of classes for the term -- this part of our brains tends to go offline. The amygdala, or emotional center, takes over. We then act with feeling instead of logic.
During stressful times, the need to have something now to take some of that stress away feels stronger than the need to be fiscally responsible over time.
Molly Crocket wrote in the Guardian, “The pressing demands of an overdue utility bill or an essential home repair may cause cash-strapped borrowers to fixate myopically on getting access to fast and easy cash.”
What to do to prevent falling prey to these practices? Tackle your stress head-on. Turn to exercise, meditation, journaling or another pastime that can help you worry less about the trying parts of your life. While all of us are prone to overspending when we shouldn't, it's important to look at the consequences down the road. It's rare that a person takes out a loan to satisfy some instant gratification and doesn't look back on that decision with regret.
I've been there: Your financial aid check is late and you need to buy books so you can do your homework. You had an emergency and had to pay medical bills. Now you're late on rent and your landlord is threatening eviction. The good news is just because you're out of money doesn't mean you're out of options. If you can't get a fee-free, interest-free loan through a family member, check into what your school has available. Many schools offer short-term or emergency loans, which can be taken out for a small fee, and are often interest free -- something that cash advances and credit cards are not. Some student councils also offer emergency loans. Before you take out an emergency loan make sure that you really need one. Be clear on the terms of the loan and have a solid repayment plan.
To be eligible, usually you have to be a full-time student, yet some schools offer assistance to part-time students, too. Additionally, there may be academic requirements, such as a minimum GPA. In some cases, you must not have defaulted on a previous emergency loan at the institution (or with the student government). Lastly, these loans are usually only available during a specified range during the semester, which often ends before the semester does. For example, the availability dates for emergency loans at Berkley for summer term in 2015 are May 26 through August 14, 2015.
Terms and fees
Most loans must be paid back within 90 days (see here and here for examples), though some loans have shorter repayment periods. Usually there's a fee associated with taking these loans, and it can be anywhere from a few dollars to upwards of $20. You'll want to check the specific terms of the loan before you sign anything. Some schools have caps on how many times you can take out an emergency loan. Commonly, there's a once-per-term rule: you can only take out an emergency loan once per term -- even if you repay the first one. There may also be a limit on how many times a year or how many times total during your degree program that you can take out a loan.
How to apply
Depending on your school, you may be able to apply online. Otherwise, you may have to visit the financial aid office, the business affairs or accounting office. Each school does things a little differently. You'll need to fill out an application, which may ask you to provide a statement regarding your emergency or unexpected circumstance. You may also need to provide evidence of your hardship, such as copies of bills or bank statements. You may be required to sign a promissory note saying you promise to pay back the loan. Once approved, funds are usually available within a day or two.
What loans can be used for
Each loan has its own stipulations. Some are for very specific costs, such as tuition, while others are meant to cover anything financial aid would. You'll want to check with whoever is issuing the check about what you are and aren't allowed to use the funds for. Common costs covered by emergency loans include
- utilities such as electricity and water
- school supplies
Emergency student loan programs are safety nets unique to college. They're relatively risk free since they're low to no-interest. The fees are low and often you know that more money is coming next term. Although they're often overlooked, emergency student loans are great resources for students in a crunch.
Getting a credit card has become a rite of passage for many young Americans. Whether it's acquired in high school or college, a credit card is a way to monitor extra spending as well as a tool for parents to help their kids pay for the extra life essentials. Also, building a credit score is essential for large future purchases.
However, having a credit card can backfire. Young adults taken in by the illusion of a free credit line might find themselves plunging deeper into debt as they tackle student loans and growing professional lives. Haunted by financial choices made years ago, the once shiny freedom is now a plastic nightmare.
According to the Wall Street Journal approximately 70 percent of undergraduate students in the United States take out some sort of loan to pay for their education, averaging in at about $33,000 per student. The average American home utilizing one credit card has a little less than $16,000 in debt at any given time, stated CNN.
Financial blogger Jason Hull writes about the way in which the human brain is actually wired to react differently to the ways we pay for goods and services. Brain scans show that pain is registered on a significant level when we pay for things in cash versus when we swipe a credit card, where almost no pain is registered whatsoever. The very act of handing over cash makes us experience a sense of loss -- our wallets get smaller and we know down to the cent how much we have left. Using a credit card is different; it's impersonal and we can swipe as many times as we need to in order to get what we want, which makes our brains feel good.
Whether we are purchasing our morning coffee, signing up for a 36-month lease on a new car or taking on a significant amount of debt to pay for college; sensitive bits of reasoning and behaviors are at play making our decisions, sensible or otherwise, seem rational. Part of this rationalization is analyzing how much debt we can incur compared to the result we are seeking like a new car or an educational degree. Plus, the personal and professional benefits that comes out of taking on debt.
Cognitive dissonance is the mental discomfort that occurs when we think two opposite things or hold two opposing beliefs. For instance, when we are in debt but don't think of ourselves as people who owe others, we seek to minimize this disconnect, which in this case involves paying off our debt slowly but surely.
A new normal
Socially speaking, being in debt has become so normal that it is nearly impossible to find someone who doesn't have a credit card or significant debt in their lives. The psychological stress of debt is well documented; physiological reactions to getting a bill payment in the mail or checking your loan to see how much interest has accrued can cause sweating, headaches, increased heart rate and feelings of anxiety. When you are swiping that card now or have your mouse hovering over the 'submit' button on loans for school, remember that this debt will be in your life for years to come.
If you're in debt now or are going to be in the future, keep in mind the ways your brain will minimize the real impacts of debt. No matter where you're at in life, finding a stable financial advisor to monitor your debt intake and credit card spending will keep you from cringing whenever you open your mailbox five or ten years down the road. Remember that some debt is worth taking on for a car, an education or a new home -- but not all debt is beneficial to your life, and the financial habits you form now will stay with you.
Bankruptcy is perhaps the scariest ghost that can loom over one's financial well-being. In the years since the 2008 Financial Crisis, it has become a reality for millions of Americans. While the number of new bankruptcy filings for businesses and individuals has fallen considerably since 2008, there were still over one million bankruptcy filings in the financial year ending March 31, 2014.
What kinds of bankruptcy are there?
One thing that often makes bankruptcy confusing are the varieties of bankruptcy, each referred to by the chapter of the Bankruptcy Code by which they are defined. Most Americans are unlikely to become involved with Chapter Nine (municipalities), Chapter 12 (family fishermen and farmers) or Chapter 15 (bankruptcy in multiple countries). The most common forms of bankruptcy are:
- Chapter 7 -- Liquidation of debtor’s property to pay off creditors.
- Chapter 11 -- Generally used by businesses, Chapter 11 or "reorganization" allows a business or individual to reorganize its affairs and stay in business to pay creditors over time.
- Chapter 13 -- Also called "individual debt adjustment," allows an individual earning a wage to propose a plan for repayment of debts over a period of (typically) three to five years. A significant benefit of Chapter 13 is that debtors are often allowed to avoid home foreclosure and have the ability to repay certain other debts with a long-term payment plan.
What happens when you declare bankruptcy?
Bankruptcy proceedings fall into four basic concepts:
- Accounting -- An accounting of all assets, liabilities, income and any other relevant financial information.
- Reorganization -- In Chapter 11 and Chapter 13 bankruptcies, the goal is to reorganize the financial affairs of a business or individual in order to arrange for a manageable repayment of debt over time.
- Discharge -- The elimination of personal or business liability for certain outstanding debts and the prohibition of creditors from engaging in collection efforts.
- Liquidation -- The sale of the debtor's property, the proceeds of which are distributed to creditors according to their rank in a repayment hierarchy.
The primary benefit to a debtor when declaring bankruptcy is the concept of discharge. Discharge means that some of the financial obligations of the debtor are essentially wiped clean, and creditors can't hound you with collection efforts. The key word when it comes to discharge is "some." Certain debts are not dischargeable in bankruptcy, and these vary by Chapter.
The primary drawback of bankruptcy is liquidation, which means selling your stuff and using the money to pay off your debts. Just as certain types of debt are not subject to discharge, certain types of property and income are not subject to liquidation.
Can you ever get out of bankruptcy?
Bankruptcy isn't a fun process and is often a life-changing event; however, the intention of bankruptcy law isn't to punish a debtor and hold him down financially, but to provide a fresh start.
While a bankruptcy certainly isn't good news for your credit report, it doesn't stay there forever. A Chapter 7 will only remain for ten years, and Chapter 13 for seven. Through sound personal finance, bankrupt debtors can rebuild their credit and financial health. The forced frugality and tough lessons learned through bankruptcy should be seen as a template for a more financially responsible future.
I would watch with envy as my friends booked trips to Miami, Jamaica and other such warm weather hot spots where you could spend your entire spring break lounging around and indulging to your heart's desire. For me, however, that sort of spring break was out of the question, as I simply didn't have the money. Luckily, I quickly learned that with a little creativity, you can have a fun spring break without spending a fortune.
If you're low on funds and wondering what to do with your time off, here are some affordable suggestions:
Take a road trip
Can't swing the cost of a flight? Gather up some friends and hit the road. Since you can divvy up the cost of gas and tolls, it'll be considerably cheaper to travel by car, and you can keep lodging costs to a minimum by staying at no-frills inns or motels.
Soak up city life
If you've got access to a nearby city, you can create a week-long itinerary that lets you take advantage of everything it has to offer. Hit up some museums, visit a few landmarks or go on a walking tour of some offbeat neighborhoods.
Rent a ski house
If your school is within a reasonable proximity to skiing and winter sports, round up a group of friends and split the cost of a week-long house rental. Many ski houses are set up to accommodate a dozen or more people, thus keeping the per-person price to a minimum. Even if you only hit the mountains once or twice to keep costs down, you can enjoy a week of simply hanging out. Pack a bunch of DVDs, bust out the board games and stock up on hot chocolate and snacks. It's essentially an extended sleepover, minus the pillow fights (or not).
Take a class
You deserve a break from hard-core academics, but that doesn't mean you can't indulge a hobby or area of interest. Sign up for a week-long cooking class, take ballroom dancing lessons or work on your tennis skills.
If you can't afford a vacation this spring break, why not use the time to give back? Find a cause you're passionate about and spend your time off helping others. Organizations like Habitat for Humanity and United Way run spring break trips geared toward college students looking to put their vacation time to good use, and as an added bonus, you'll get to meet new people and gain experience that will look great on your resume.
Spending spring break with your parents may seem kind of lame, but there's something to be said about getting a week of home-cooked meals without having to spend a dime. Coordinate with your hometown friends and you can turn your break into a week-long reunion.
While it may be tempting to spend your spring break at an exotic destination, there are plenty of enjoyable alternatives that won't leave you with a giant credit card balance hanging over your head. With the right company and a little imagination, you can have just as much fun as your beach-hopping, globe-trotting friends, and you'll come away with far less debt in the process.
From credit cards to home and student loans, debt is big business in America. According to Bloomberg Business Week, student debt has grown by $100 billion per year since 2008. Outstanding consumer debt stands at a record $3.2 trillion. This is the result of new debt being acquired faster than existing debt is paid off.
The specter of incurring interest and obligations for future payments would seem like a strong deterrent against borrowing money. So what is it that drives people to take on debt or delay repaying their existing debt?
It comes down to two primary points: delayed gratification and optimism regarding future earnings.
Optimism for the Future
When a student takes out a loan -- most consider it an investment in their future. They assume or hope that future earnings will make those future loan payments affordable or even insignificant. However, as illustrated by the Huffington Post, accumulated student-loan debt has increased dramatically in the past decade while inflation-adjusted wages have decreased.
The same goes for business loans. A study by Na Dai and Vladimir Ivanov reveals interesting facts about optimism in relation to business debt. The authors note that the returns on entrepreneurial ventures are relatively small compared to the inherent risks. Also, optimistic entrepreneurs are more likely to borrow more money; particularly short-term loans with high-interest rates (think credit cards). Credit lenders also tend to grant optimistic business borrowers with larger amounts of money.
In short, debt-acquiring students and business owners put their money where their mouths are: they are confident enough that their future earnings will be much higher than their current earnings, and so are willing to take on substantial debt to finance an uncertain future.
In the 1960s, Walter Mischel, a Stanford professor, came up with a simple test known as the Marshmallow Test. Mischel and his team would give a child a single marshmallow and tell the child that he could eat the marshmallow immediately or wait a few minutes and be rewarded with a second marshmallow. The concept is known as delayed gratification.
The Marshmallow Test helps explain the way people tend to take on and repay their debt. Assume a seventeen percent annual interest rate on a credit card. When a consumer spends $1,000 in credit card purchases for immediate consumption, they are making the choice to have $1,000 now, instead of $1,170 a year from now, ignoring for simplicity the compounding interest.
While this concept doesn't seem to have much to do with taking out a student loan, it certainly applies to repaying those loans, or any loans for that matter. If a borrower has $30,000 in student debt at a seven percent annual interest rate, and comes into $30,000 of disposable income, she can either pay off that $30,000 now or spend the $30,000 on consumption and be faced with $32,100 in debt in one year.
There are certainly different motivations behind taking on and paying off different types of debt. Putting a leather jacket or a big-screen TV on a credit card isn't quite the same as taking out a six-figure loan for a PhD; however, the psychology of those decisions is very similar and boils down to a combination of optimism for the future and the concept of delayed gratification.
I quickly finished my undergraduate degree before going on to grad school. I loved learning and I loved school. I knew I would never have a problem generating income. What I did not consider was how much the $50,000 in student loan debt would cost me each month for the next thirty years. Or what could happen if life threw me a curve ball.
After finishing grad school I was diagnosed with Crohn's Disease. Turns out it's not cheap. Lucky for me, I snagged a job with the Federal Government and had no issues getting health insurance or medical care. The Crohn's diagnosis was a small blip on my radar as I set out to live life and climb the corporate ladder.
Then I left my federal job.
Since then, I have bounced around from job to job and even went a year without health insurance. Medical debt, unemployment and student loans -- that won't go away even after bankruptcy -- have consumed my life. When the wage garnishment letter arrived, I had no choice but to file for bankruptcy. If any of my income were garnished I would not survive month-to-month. This was the curveball I hadn't anticipated.
Even though deciding to file for bankruptcy was a difficult decision, I am confident that it was the right decision for me, and you might find yourself in the same situation someday. If you do end up filing for bankruptcy, here's what you should know:
Cross Collateralization Crisis
My car, which is financed through a credit union, will be seized since there is a cross-collateralization clause associated with my auto loan. This means a line of credit was secured by my automobile and the car is on the hook until the line of credit is forgiven. My lawyer indicated we could ask the credit union for an auto exemption, but it was unlikely that they would oblige. Financing a new car is not out of the question after bankruptcy, but I can kiss the 2.9 percent interest rate goodbye.
The trustee has all the power
The difference between chapter 7 and chapter 13 is the way debts are forgiven: under chapter seven debts are discharged whereas under 13, debts are repaid over time. There is a means test in chapter 7 and if too much money has been earned, chapter 13 may be the only option. In my case, I was barely eligible for chapter 7 due to bonus money and a relocation check that I earned this year.
To facilitate a chapter 7 bankruptcy, a trustee administers and facilitates the bankruptcy proceeding. This person serves as the "watchdog" over the process and has the power to sell any of your belongings that aren't protected under the law.
In my case, the trustee asked lots of personal questions about my income, tax returns and purchases. He may or may not demand that this year's tax refund be turned over to the court.
Consider all of your accounts
If you have decided to file for bankruptcy, make sure you include everyone to whom you currently owe money. Even utilities, landlords and other non-revolving accounts should be listed on your case since any deposits on these accounts are protected as part of your estate.
All accounts listed in your bankruptcy will be notified and given the opportunity to attend your 341 meeting of creditors. My landlord showed up and asked the trustee if she needed to be there. It was awkward. If I had known she would be invited, I would have given her a call and let her know myself -- as a courtesy. She just wanted to know if I would continue paying rent on time. If I were behind on rent, however, the lease could have been dissolved under the proceeding and my security deposit would have been returned.
Any accounts listed in your bankruptcy will be protected to the fullest extent of the law. This means your landlord must return your security deposit, your utility company can't shut your account down and you generally have more safeguards. Accounts not listed in your case will not be protected; debts not listed will not be discharged.
Ready. Set. Improvise. (Nothing is as bad as it seems.)
All in all, filing for bankruptcy was a relatively simple process. The debts forgiven in my bankruptcy will be discharged in the next few months. My credit score will fall. It will take time to rebuild credit and establish favor in the eyes of the credit score gods. The bankruptcy itself will remain on my credit report for the next eight to ten years.
But I could have spent the next ten years trying to dig myself out of debt. With ongoing medical costs from a chronic illness plus a hefty student loan balance, it may have taken a lifetime to establish financial solvency. By filing for bankruptcy, I chose to wipe the slate and start over. It was a tough decision, but it's not about pride at this point.
What could I have done differently? Everything. Or maybe nothing. While it's important to plan your future and position yourself for success, when life happens -- you improvise.
I am lucky to have secured another vehicle from a family friend -- one that I will pay off over a few months. This way, I will own the car and won't have hefty payment each month.
I have been given access to my expensive medication through a patient assistance program, which means I don't have to pay any copays.
As far as building a financial future, I have learned how to make smarter money choices. I have learned that I don't need to buy a "latte" each day, because these little things add up and prevent me from getting ahead. By making smart money choices, I can put more money into savings and create a safety net if the unexpected happens again.
Two years ago I had $20,000 in my savings account, and my biggest problem was figuring out where to invest it. I found myself bragging about my savings prowess to anybody who would listen. Then everything changed when I got divorced. My $20,000 was reduced to nothing overnight. Then all of a sudden, I was looking at $6,000 in credit card debt.
As you can imagine, it was a bit of a financial blow -- but making payments on my card balance now acts as an instant mood elevator. Even if I just have five extra dollars, when I put it toward my credit card, I feel better. My slow but steady progress means three things: I'm getting my finances back in order, I'm moving on from my past and I'm reducing those pesky interest charges. I don't want to say that my debt was a blessing in disguise, and I wouldn't suggest it as therapeutic by any means, but there are some positives that come along with repaying it.
Paying down debt replaces feelings of blame, shame and guilt with positive emotions like hope and relief. According to Business Insider, being in debt may eliminate the happiness you get from spending your money -- such as the excitement of looking forward to a vacation or a night out. It stands to reason that reducing your debt can have the opposite effect, and it often does. It restores the notion that the future is something to look forward to.
It helps repair personal relationships. Money is the number one thing that couples fight about. So working on money issues in a positive way can be the antidote to conflict.
Couples who look at their finances together, create a budget and stick to it, often find their relationship improves as their debt decreases. While repaying debt can jump-start the process, healthy communication is essential. If one person in the relationship is a saver, and the other a spender, tension created by unnecessary purchases can surface quickly. Couples who function better financially have the added benefits of better communication, less stress and a learned sense of financial responsibility that can be passed down to children when the time comes.
It erases past mistakes and can help in the healing process. For me, it was a divorce that drained my bank account, but we all have our reasons for sliding into debt. Physical evidence of that debt -- bills, online statements or a record of calls from collectors -- can serve as a reminder of the negative experiences that got us there. Rekindling a bank account or settling a balance can be an important step in moving forward, unburdening yourself and moving on.
It gives you freedom to advance toward your goals. Debt can keep us from starting a business, starting a family or going back to school. Many experience a feeling of being stalled; that you have to wait to start your life until your finances are in order. Paying the debt off or even making one small payment in that direction is helpful for regaining hope. It’s also motivation to keep going and watch that balance shrink smaller as a growing sense of accomplishment will lead to increased self-confidence in everyday activities. That’s how you win a marathon; just keep putting one foot in front of the other. In fact, many people who have stuck to a budget and paid off large portions of debt are less likely to fall back into debt later in life.
Paying off outstanding debt has many emotional, physical and psychological benefits. These extra perks to becoming debt-free include: Less stress, improved health, emotional relief, freedom to pursue other life goals, confidence in your sense of self, stronger resolve to remain debt-free, improved relationships and cutting the tie between spending and happiness. Whether you're making the minimum payment month to month, or paying off large portions at a time, paying off debt will not only benefit your emotional well-being, but your physiological, physical and financial well-being as well.
Recent college graduates are more in debt than ever before. When you combine substantial credit card debt with crippling student loan payments, it may look like that financially secure future is moving farther and farther away. With this as the new normal, many young adults are now looking into bankruptcy and asking, "Am I too young to file?" The quick answer is, "No." The long answer involves a little more info.
The Legal View
Anyone of legal age can technically file for bankruptcy, but this doesn't mean you will be granted this status. In other words, you can't simply say, "I'm bankrupt" and have your debt disappear. You have to be granted a bankruptcy ruling by the court. There are several different bankruptcy options referred to as "chapters." The most common bankruptcy chapter for a young adult in his or her twenties would be a Chapter 7 or Chapter 13 filing.
Chapter 7 works best when you have assets to sell to pay some of your debts. With Chapter 13 filing, some of your debt can be forgiven, but you will have to set up a payment plan to repay the remaining portion of that debt. The goal is to get everything paid in full within five years. The only way you'll be granted a Chapter 13 filing is with a job and a steady income. Unfortunately, there is no "Get out of jail free" card when it comes to filing for bankruptcy.
The Credit Hit
Bankruptcies can stay on your credit report for a minimum of seven years like a big scarlet "B" on your credit history. The result of this is that you'll find it extremely difficult to secure a loan for a car or home. Sadly, this is often the time when young adults make these types of purchases. You'll also find it challenging to apply for credit cards. In many ways, you'll be out of luck when it comes to borrowing money.
The Bright Side
In some circumstances, taking the credit hit can be a good thing if it keeps your spending in check and forces you to live within your means. And luckily, filing for bankruptcy when you are young does provide you with ample time to recover. Suppose your debt was too much to handle right after graduation and you're granted a bankruptcy ruling to settle your accounts. By the time you turn 30, you can start on the path toward buying a home without that "B" looming over your head. By living on a budget and forcing yourself to save and pay off debts, you'll fall into great financial habits that will benefit you in the long run.
If your debt has become too overwhelming, it might be time to reach out and speak with an experienced bankruptcy attorney. They can provide answers to all your questions and make sure you make an informed decision with regard to your financial future.