Although many spring commencement speeches this year encouraged new college graduates to take risks and be bold, some graduates might already feel defeated this summer. This is because the job search process can be difficult, and finding a job that is adequate for covering personal expenses and debt can be a challenge. Even though student loan debt typically can’t be discharged if a person decides to file for bankruptcy, other types of debt -- such as credit card debt -- can be. A personal bankruptcy filing may be enough to help some California graduates who need immediate relief from debt that has become unmanageable.
Right now, one senator is supporting legislation that would let privately financed student loan debt be discharged in bankruptcy. This type of legislation, however, likely won’t affect a majority of college graduates. This is because the government holds a large percentage of their more than $1 trillion in college debt.
One reason student loan debt has increased so much in the past several years is that more people are earning graduate school degrees. Federal law prohibits defaulting on student loans except in rare situations of substantial hardship. However, some consumer advocates say that the fact that this type of debt is nearly impossible to discharge makes college graduates feel burdened to the point that they might not have the ability to pay the loan back.
Drowning in overwhelming debt can be frustrating for a college student who is trying to survive financially. Personal bankruptcy protection, however, may provide a much-needed solution. Removing credit card debt and other personal debt through a bankruptcy filing may enable a graduate to more easily pay down his or her student loan debt in California. Moreover, it is hoped that the Congress will pass legislation to address this growing national problem.
Source: valuewalk.com, "As Student Loan Crisis Looms, Bankruptcy Discussed", Mark Melin, June 25, 2014