I'm 25, should I file for bankruptcy?

Asked almost 6 years ago - Chicago, IL

I'm 25 years old and have already acquired about $30,000 in credit debt and $25,000 in school loans. I'm struggling as is just to pay rent and my current bills. Would bankruptcy be an option for me? If so, how long would it be before I'm able to buy a car or a house...etc.?

Attorney answers (5)

  1. Kevin Lee Linder

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    Contributor Level 14

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    Answered . There is a little bit of trutoth answers -- students loans can be discharged, but it is very difficult. You may be able to buy a vehicle and a home right after the discharge. Expect to pay a higher interest rate and you may not be able to afford an expensive car. In Central Illinois we frequently have individuals getting vehicles immediately upon the discharge of their Chapter 7. A lot depends on your credit score -- which is a combination of public information (a bankruptcy filing or judgments are public information) and how you manage your credit -- the amount of credit you have and whether you pay your bills on time and how lonjg you have had credit. Frequently we see people who have no choice but to file bankruptcy -- consult a bankruptcy attorney in your area. They will walk you through your income and expenses and can show you a copy of your credit report. Sadly our economy right now is sending a lot of people into bankruptcy -- an experienced bankruptcy attorney will help you and advise your on your options.

  2. Mazyar Malek Hedayat

    Contributor Level 13

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    Answered . You could benefit from bankruptcy or even aggressive credit negotiation. In either case, your student loans may enjoy special status. I say 'may' because it depends on whether they are government or private in nature. As for the effect on your credit, your FICO score will more than likely improve by up to 100 points.

  3. Mazyar Malek Hedayat

    Contributor Level 13

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    Answered . You could benefit from bankruptcy or even aggressive credit negotiation. In either case, your student loans may enjoy special status. I say 'may' because it depends on whether they are government or private in nature. As for the effect on your credit, your FICO score will more than likely improve by up to 100 points.

  4. Gabriel Cheong

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    Answered . Note that I am not licensed to practice in your state.

    You can discharge the credit card debts in bankruptcy (if you qualify) but the studen loan debt will stay with you forever until you pay them off. Student loan debt cannot be discharged in bankruptcy.

    Bankruptcy goes off your credit report in 7-10 years depending on what type you're filing. It doesn't mean that you won't be able to get a car loan or a mortgage during this time. It simply means that you'll be a risky loan and therefore, you will pay very high interest rates.

  5. Brett D Weiss

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    Answered . > Student loan debt cannot be discharged in bankruptcy.

    This is incorrect. Student loan *is* dischargeable in bankruptcy, but you must demonstrate "undue hardship," which can be a very difficult standard to meet. It is more difficult to show in some areas of the country than others, due to inconsistent rulings by different Courts of Appeals.

    > Bankruptcy goes off your credit report in 7-10 years depending on what type you're filing. It doesn't mean that you won't be able to get a car loan or a mortgage during this time. It simply means that you'll be a risky loan and therefore, you will pay very high interest rates.

    While this may be true for some people, it is by no means true for all. For the first two years after discharge, you may well pay more for financing, but if you put down a larger down payment, you may pay normal rates. After two years, assuming your post-bankruptcy credit is good and you have sufficient income, you are eligible for a FHA insured mortgage at normal rates. Most of my clients find that two years post-bankruptcy, financing rates return to normal rates.

    Brett Weiss
    brett@BankruptcyLawMaryland.com
    www.BankruptcyLawMaryland.com

    *****************************************************************
    The Small Print: This response is for discussion purposes only. It isn't meant to be legal advice and you shouldn't treat it as such. If you want legal advice, speak with a local lawyer familiar with your state's laws who can review *all* of the facts and the law applicable to your situation.
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