• 20
  • September
    2012

For young adults, starting a new and independent life after college can mean piling on a tremendous amount of debt. The combination of student loans, car payments, a home mortgage and credit card debt can be overwhelming. Often, young people with debt payments that an entry-level salary cannot cover should get help before they destroy their credit ratings.

The Wall Street Journal recently offered some basic tips and advice for avoiding financial trouble that could lead to bankruptcy. While debt has the potential to spiral out of control, there are ways to combat your debt load and live with greater peace of mind.

  • You should focus on "cutting back and consistently paying down as much as possible," in order to reduce the amount of interest that is accruing on your debts and to maintain payment manageability.
  • For credit-card debt that has gotten out of control, call your lender to figure out what your options are. You may be able to negotiate a lower interest rate or minimum monthly payment. One way to do this is to use a reputable credit-counseling service such as the one offered through the non-profit National Foundation for Credit Counseling.
  • To tackle federal student loans, they suggest looking into an income-based repayment plan. These plans lower your monthly payment to no more than 15% of your discretionary income. For private student loans, contact your lender about a possible hardship deferment.

Alternatively, filing for bankruptcy can offer a "clean slate" and a financial fresh-start. Student loans cannot be discharged but credit cards and other debts can be, making your total debt load more manageable. While a bankruptcy filing will stay on your credit report for up to 10 years, for a young person, that could mean the bankruptcy will be wiped off their credit history before he or she is in a position to purchase a new home and truly establish a footing in life.

Source: The Wall Street Journal, Confront Your Debt, Rachel Louise Ensign, June 25, 2012

Our law firm provides legal assistance to people struggling with financial difficulties, helping them to prevent foreclosure, garnishment and creditor harassment, or to file for bankruptcy.