DebtStoppers USA Bankruptcy Blog

Several years into a slow but steady economic recovery, student loan debt is threatening to wipe away any gains.

As our bankruptcy lawyers discussed last week, the investor-led housing recovery could stall as investors pull back and ordinary home buyers fail to step in because they're grappling with massive student debts.

With the average student debt load topping $25,000 - and many grads paying off debt in the hundreds of thousands of dollars - it's normal for folks to have education loan bills as high as a typical mortgage payment.

According to a new study by Trulia.com, these borrowers are starting to put a damper on the fragile recovery.

In the past, college graduates have been more likely to buy homes and cars than those without degrees because they typically earned more money and could thus afford them.

But these days, people with student debt are less likely to take out car loans and mortgages, as large portions of their paychecks are earmarked for debt - making it difficult to save for a down payment or qualify for a home loan.

And the problem could get worse as the percentage of young adults with student debt grows. Since 2003 - just ten years ago - the portion of 25-year-olds with debt from education loans increased from 25 percent to 43 percent.

As more borrowers default on their student loans, the Consumer Financial Protection Bureau is seeking solutions for making repayment easier - particularly for those with private student loans, which have fewer repayment options than federal loans.

Strategies could include income-based repayment, in which payments are made based on earnings rather than what's owed, and loan refinancing.

Even lowering payments for just a few years could offer enough relief to allow borrowers to catch up or find a financially-stable job, say experts.

One of the biggest problems with student debt has been the unavailability of bankruptcy. While filing for bankruptcy can relieve other unsecured debts like credit card debt and medical bills, student loan debts are rarely discharged.

But while bankruptcy can't directly eliminate student debt, it can still provide a solution. Keep in mind that, along with education loan payments, today's young consumers are also struggling with credit card debt and high rates of unemployment and underemployment.

Chapter 7 bankruptcy can wipe out many unsecured debts in as little as a few months, drastically reducing monthly payments and freeing up the money to get current on student loans.

If the recovery is going to be sustainable, we need to make it easier for borrowers to manage student debt payments. But until then, bankruptcy can be the most realistic way to buy time - and money.

Continue reading "As Student Loan Debt Drags Down Economy, Consumer Group Pushes for Repayment Reform " »

Filing for bankruptcy isn't something to be taken lightly, but the consequences are not as dire as most consumers think.

While many folks worry bankruptcy will be the end of their financial freedom, it could actually be a new beginning. Take unsecured credit offers, for example.

It's a commonly held belief that it will be difficult to impossible to get a credit card after bankruptcy. But as a recent Bankrate.com column points out, a bankruptcy discharge can, in some ways, make you more appealing to creditors.

If you qualify for Chapter 7 bankruptcy, your debts could be eliminated entirely within a matter of months. With no debt, you're an ideal candidate for new credit cards.

Furthermore, creditors know that it will be eight years before you're eligible for another debt discharge through Chapter 7 - and you're unlikely to file again anyway, as most people who go through bankruptcy only do so once in their lifetime.

Consider it bankruptcy's hidden benefit: In many cases, receiving a bankruptcy discharge can actually improve credit.

That's not to say bankruptcy comes without drawbacks.

Yes, when you file, the bankruptcy will appear on your credit report for the next 10 years. And yes, if you have a history of bad credit, the credit card offers you receive initially will probably come with high interest rates, low credit limits and other less-than-stellar terms.

But look at it this way. Bankruptcy provides a fresh financial start, so in theory you won't need to be reliant on your new credit card anyway. When you use plastic only occasionally and make sure to pay your balance each month, you won't have to worry about a low limit or sky-high interest.

Instead of focusing on the best offer, focus on the one that will allow you to most quickly reestablish good credit, such as a secured card, says Bankrate.com. A card from a bank or credit union may come with fewer perks than one from a finance company, but will be viewed more favorably by lenders - and that's what counts.

The sooner you begin reestablishing credit after bankruptcy, the sooner lenders will trust you enough to consider you for a mortgage, car loan, or better credit card.

With responsible financial behavior, your life after bankruptcy can become more financially rewarding than you could have imagined.

Continue reading "Getting Credit Cards After Bankruptcy Easier Than Most Consumers Think" »

Remember back in 2010 when the Federal Reserve enacted new rules meant to protect consumers from the hidden cost of overdraft protection? If you're like most folks, the answer seems to be no.

A new report shows that more people are incurring overdraft protection fees - and banks are reaping the profits. Banks and credit unions pulled in $32 billion from the fees last year, a 1.3 percent increase from 2011.

Consumers have long been befuddled by the concept of overdraft protection, probably because of its helpful-sounding name. But despite its moniker, overdraft protection does little to protect finances, say bankruptcy attorneys.

Here's a refresher on how it works: If you're not signed up for overdraft protection and you attempt to make a debit card transaction for more than the amount of money in your bank account, the transaction is simply denied. With overdraft protection, however, your bank allows the transaction to go through, then charges you a fee - typically $30 to $40.

Previously, banks automatically enrolled customers in overdraft protection programs as a so-called convenience. So if you swiped your debit card at Starbucks without realizing your account was 50 cents short, that $5 latte could end up costing you $45.

As you can imagine, when you're on the edge of being broke those costs start to add up. Like credit card debt, they can become a seemingly unending cycle of fee after fee.

That's why in 2010 the Fed created a law forcing banks to notify customers of their freedom to opt-in to overdraft protection, as opposed to being automatically (and often unknowingly) enrolled.

Yet, as NBC News reports, 25 percent of bank customers still regularly use overdraft. To make matters worse, many of those who use overdraft protection end up taking out payday loans when their checking accounts get too low.

Payday advances are another trap for cash-strapped consumers. Because of the short terms of the loans, many borrowers are forced to roll them over again and again. With annual fees frequently ranging from 300% to 1000%, payday loans can sink consumers into debt so deep it's impossible to get out.

When you're struggling to keep your finances afloat, a slew of bank fees can be a devastating blow. If you're out of wiggle room in your budget, something's got to give. By reducing or eliminating credit card debt through bankruptcy, it's possible to start lowering bills, improving credit and decreasing the occurrence of frustrating fees.

If your debts are too overwhelming to overcome on your own, bankruptcy can be the most effective way to dig your way out. The result will be fewer fees - and a whole lot less stress.

Continue reading "Despite Consumer Protection Laws, Overdraft Fees and Payday Loans On the Rise" »

More than half of student loans in the U.S. are going unpaid due to financial hardship, according to recent data.

As of last spring, 51 percent of education loans were in deferment or forbearance - periods in which borrowers are able to temporarily delay payments during times of unemployment, underemployment or other financial difficulty.

As opposed to defaulting, deferring payments doesn't damage credit - at least not immediately, say bankruptcy attorneys.

However, as student debt grows, fewer students are able to make payments on their loans - even after they've been given a break through deferment or forbearance.

In most cases, interest continues to accrue while payment is on hold, resulting in a larger debt when it's time to begin paying.

When many college grads finally begin repaying debts, they're usually dealing with a growing set of bills related to "real world" costs like home ownership, personal loans, and the expense of raising a family.

It seems that the program intended to offer relief to borrowers may only end up making their situation worse.

Federal loans, which allow for the longest period of nonpayment - up to eight years compared to the one year offered by private loans - also have the highest rate of deferment.

And more borrowers across the board are choosing to put off repayment. Between 2007 and 2012, the amount of debt borrowers postponed paying increased by 70 percent.

Instead of delaying the inevitable - and, in many cases, only making things more difficult - borrowers may be better off seeking ways to lower their overall expenses each month.

By, say, reducing credit card debt and mortgage payments, consumers can free up more funds to budget toward repaying student debt.

While bankruptcy can't usually eliminate education loans, it can relieve the pressure of those loans by tackling many other common financial burdens - things like credit card debt, medical expenses and mortgage debt.

If your financial situation has you struggling to keep your home, Chapter 13 bankruptcy even has the power to stop foreclosure.

A college education is supposed to help you move forward, not hold you back. If your debts are holding you hostage, bankruptcy can be the most effective way to break free.

Continue reading "As College Costs Rise, More Borrowers Delay Student Loan Payments on Growing Debts" »

It's common knowledge that filing for bankruptcy takes a toll on credit. But it turns out that most of us overestimate the extent of the damage.

As a result, millions of people may be missing out on the opportunity to escape a mountain of debt or save their homes from foreclosure with help from bankruptcy.

According to a recent column on Bankrate.com, many consumers are able to begin rebuilding credit immediately after filing.

It's often assumed that it will be difficult to qualify for a credit card or loan after bankruptcy. In reality, however, the majority of people who file get credit card offers shortly after receiving a bankruptcy discharge.

In fact, according to the article, the number of companies offering credit to people who have filed for bankruptcy are on the rise.

It's true that bankruptcy will remain on a credit report for up to 10 years. But though it may sound counterintuitive, bankruptcy can also make you a prime candidate for credit.

If you've filed for Chapter 7 bankruptcy, you won't be able to file again for another 8 years - if you ever file again, that is. The reality is that most people will only file for bankruptcy once in their life, and creditors know this.

Of course, just because you're receiving credit card offers doesn't mean you should apply for multiple credit cards.

Credit card issuers also know that, because bankruptcy initially compromises your credit, they can charge a higher interest rate. Having a low credit score means less favorable terms, lower credit limits, and extra costs like annual fees.

The good news is that it's possible to begin improving your credit score - and your chances of obtaining better rates on car loans, mortgages and credit cards - from the moment your debt is discharged with bankruptcy.

By taking steps such as paying your bills on time, staying under your credit limit, and paying off your balance each month, your credit score will slowly but surely begin to increase.

If you can't qualify for an affordable rate or don't trust yourself with a traditional credit card, a secured card or loan is a smart alternative. With a secured line of credit, you provide a sum of money to a bank upfront and receive a credit limit for the paid amount.

If you're considering filing for bankruptcy, chances are your credit is already suffering and only getting worse by the day. With the right bankruptcy plan, it's possible to stop the financial bleeding and start the healing process.

Filing for bankruptcy isn't the end of the world - for many, it can be a brand new beginning.

Continue reading "Rebuilding Credit After Bankruptcy May Be Easier Than You Think, Say Experts " »

For a growing number of Americans, filing for bankruptcy may be the only realistic solution for eliminating crushing debt.

Unfortunately, many of these potential filers put off seeking bankruptcy protection because of a common misconception.

Since notice of a bankruptcy filing will remain on an individual's credit report for 7 to 10 years, most people automatically assume they will be unable to obtain loans or credit for many years after filing.

In reality, most folks can get approved in as little as a year, according to the New York Times.

As long as bankruptcy filers continue making an effort to improve their finances, having a bankruptcy "black mark" on a credit report doesn't mean all that much.

For instance, those who reorganize their debts through Chapter 13 bankruptcy can apply for a mortgage backed by the Federal Housing Administration just one year after filing. In contrast, people who file for Chapter 7 - which has the power to discharge most or all unsecured debts - must wait two years.

According to the Times article, borrowers able to quickly re-establish their credit stand the best chance of being considered by lenders.

In some cases, the situation leading to bankruptcy can also make a difference. For example, if circumstances outside of your control are responsible for your debts - such as illness, death of a spouse, or divorce - it may be possible to reduce the waiting period for a mortgage by writing lenders a hardship letter.

Of course, all this isn't to say that life after bankruptcy is always a walk in the park.

Bankruptcy itself doesn't make financial problems disappear. What bankruptcy does do is provide the framework for consumers to solve their financial problems, even if those problems once seemed impossible.

Obtaining the full benefits of bankruptcy protection requires determination and a commitment to improving one's finances. But with a little hard work, the right bankruptcy plan can get you out of a heap of debt.

Continue reading "Life After Bankruptcy Is Better Than Most Americans Think, Says New York Times" »

One of the biggest financial stories of 2012 has been America's record amount of student debt, which recently exceeded $1 trillion.

Now it seems students are breaking another record, say DebtStoppers bankruptcy attorneys.

The number of borrowers who defaulted on a federal student loan within two years of their first payment is on the rise, jumping to 9.1 percent in 2011 from 8.8 percent in 2010.

While it may seem like a modest increase, the spike represents a total of 375,000 students unable to make good on their loans, according to story on CNN Money this week.

To be considered in default, borrowers must miss payments for at least 270 consecutive days.

Default rates began their uphill climb in 2007, suggesting that the economy plays a big roll in students' abilities to repay debts.

With many college drop-outs - and even graduates - unable to find well-paying jobs, student loans often take a backseat to making rent, utility and car payments.

Private for-profit colleges had the highest rates of default, with more than 22 percent of student borrowers defaulting within three years of their first payment. Public schools had a rate of 11 percent and private non-profits had just a 7.5 percent rate.

In some cases, borrowers may be able to postpone payments under deferment or forbearance plans. Unfortunately, many borrowers become so stressed about making debt payments that they miss the window to take advantage of crucial relief options.

Often times, folks are simply in denial about their debt. People who owe more than they can realistically afford to pay frequently ignore their finances, hoping they will eventually find a way to discharge the debts. Instead, they wind up in default, with fees and wrecked credit to boot.

The problem is that bankruptcy - while often the most effective solution to getting rid of unsecured debts like credit card debt - is rarely able to relieve student loans. But that doesn't mean hope is lost.

Though bankruptcy can't eliminate student debt, it can reduce many other forms of debt commonly held by students. Bankruptcy has the power to wipe out credit card debt, eliminate liens, halt creditor harassment, relieve medical debt, and even stop foreclosure.

The sooner you recognize your finances are in trouble, the sooner you can take the appropriate actions to improve your situation. By eliminating some debts with bankruptcy, borrowers can create the financial flexibility necessary to stay current on the debts they can't escape.

Continue reading "Faced With Large Debts, Many Students Default on School Loans" »

In many cases, consumers with overwhelming debts are surprised at just how quickly bankruptcy can help them get back on their financial feet.

But in recent years, there's been one form of debt that bankruptcy can't readily relieve: student loans.

Current bankruptcy laws require what's known as an "undue hardship" to discharge student debt. Debtors must prove to judges that they have a "certainty of hopelessness" that makes paying back the debt highly unlikely, regardless of the economy.

This makes eliminating student debts an option available to only people with debilitating disabilities - and even those with true hardships must endure years of waiting to find out if their situation warrants the cancellation of loans.

Because lawmakers never defined exactly what qualifies as an undue hardship, it's been up to bankruptcy judges to make their own determinations, which are often done inconsistently.

It wasn't always this way.

Just a couple decades ago, it was possible to discharge student loans in nearly the same manner as credit card debt or car loans. But fearing that successful law and medical school graduates would take advantage of the system to do away with expensive loans, lawmakers have since tightened the law.

They've been able to get away with it - until now. As the cost of college tuition soars and the likelihood of finding a job out of school plummets, student debt poses a real hardship to a growing number of Americans.

In recent years, bankruptcy and financial experts have cried out to lawmakers to change the law before the student debt bubble bursts, further damaging an already fragile economy.

It's impossible to say when or if a change will be made to help the growing number of consumers saddled with student debt. But for many college graduates, bankruptcy can still be a useful tool for financial relief.

Along with student debt, expenses like credit card debt, auto loans, and medical bills put additional pressure on consumers.

By relieving qualifying forms of debt through bankruptcy, it's possible to free up more money each month for static costs like student loans and the mortgage.

With the right bankruptcy plan, it may still be possible for struggling college grads to achieve the financial stability they went to school for in the first place.

Continue reading "As Student Debt Bubble Grows, Lawmakers May Have to Rethink Requirements for Discharging School Loans" »

Payday loans are supposed to be a last-resort method for covering sudden, unexpected expenses.

But as NBC News reports, a growing number of people are relying on these expensive short-term loans for routine costs like house payments, rent, groceries, and utility bills.

Recent data shows that 12 million people used payday loans in 2010, and it's believed that the number has only risen since then. The most common users of cash advance loans are parents of children, divorced people, and those struggling financially.

Not surprisingly, the debt adds up quickly.

Whereas a typical credit card requires the debtor to pay off just a portion of the balance each month, payday loan providers require full repayment - plus interest - in an average of 2 weeks.

When the money isn't available to pay back the loan, borrowers are forced to roll the original amount over into a new loan - with the addition of fees - or seek a short-term loan from another lender. Often times, the debt continues to snowball until it becomes absolutely unmanageable.

According to the Center for Responsible Lending, the typical payday loan borrower ends up in debt for six months at a time at an annual interest rate of 400 percent. In fact, the amount paid in interest frequently ends up exceeding the original loan amount.

NBC News reports that the average payday loan user borrows $375 a year but spends $520 in interest.

Some states, such as Georgia, have taken action to ban the predatory short-term loans. Unfortunately, many consumers simply go online to borrow money from payday lenders.

For some, payday loan debt can be even more troublesome than credit card debt. But like credit cards, payday loans are considered a form of unsecured debt. The good news is that these debts can often be discharged with a Chapter 7 bankruptcy filing.

If payday loans are sucking the pay right out of your pockets, filing for bankruptcy may provide relief.

Not only can bankruptcy discharge the loans, but it can stop harassment from lenders, reduce the credit card debt that may have led you to rely on cash advance loans in the first place, and, depending on the type of bankruptcy you choose, even stop foreclosure.

If payday loans are holding you and your family hostage, the right bankruptcy plan can offer a fresh financial start.

Continue reading "Bankruptcy May Help Consumers Caught in Cycle of High-Interest Payday Loans" »

Young adults aren't the only ones struggling with the nation's $900 billion student debt load.

Parents are shouldering the burden, too, say Chicago bankruptcy attorneys.

As SmartMoney reports, borrowers over the age of 40 are responsible for about one-third of the country's student debt.

Some of these borrowers are still paying for their own school loans. But most are well-meaning moms, dads, and grandparents who are pitching in to help college-age kids and grandkids pay for school amid rising tuition costs.

Roughly 17 percent of parents of this year's college graduates had taken out federal Parent PLUS loans, up from 10 percent a decade ago. The average balance on parental loans is $34,000.

Even when students take out loans from private lenders, banks are increasingly requiring parents to co-sign. If students miss payments, their parents are on the hook.

Unlike credit card debts or personal loans, student debt cannot typically be discharged through an Atlanta bankruptcy - even if the borrower cannot afford to make payments. As a result, many parents must deal with credit damage, creditor harassment, and foreclosure when their children default on the bills.

But while it may seem like there's no way out of the student loan trap, students and their parents alike may be able to find relief with Tennessee bankruptcy.

Just because filing for bankruptcy can't ease student debt doesn't mean it can't ease other forms of debt.

Often times, making payments on education loans would be manageable if it wasn't for credit card debt, medical bills, and tax obligations. By reorganizing unsecured debts - or eliminating them completely - borrowers can often free up more monthly cash, begin rebuilding credit, and even prevent foreclosure.

It's only natural to want to help family members through their money struggles. But by being helpful, we shouldn't have to jeopardize our own financial future.

With the right Atlanta, Tennessee, or Chicago bankruptcy plan, you can help your family without hurting your bottom line.

Continue reading "More Parents Struggling with Kids' Student Loan Debt in Chicago" »

The last time Congress rewrote bankruptcy laws, it was to prohibit students from using bankruptcy to escape education loan obligations.

Now - in light of a $1 trillion student loan bubble - legislators are discussing the possibility of reversing that position, reports The Wall Street Journal.

Back in 2005, the government prohibited the discharge of student debt through bankruptcy, except when someone faced an undue hardship such as a physical disability that prevented the person from working, because of fears that students would simply walk away from their loans.

Since then, tuition has skyrocketed while enrollment has increased, resulting in a steadily growing student debt burden far larger than Uncle Sam could have predicted.

Between 2000 and 2010, the average student debt load surged 24 percent to more than $16,000. Students who attend private schools often carry balances of $100,000 or more.

Not only is the burden impacting the debt holders, but it's also threatening the stability of the entire economy.

With jobs scarce, many recent graduates have been unable to find well-paying positions - or in some cases, any job at all. In the past decade, earnings of young workers with a bachelor's degree have fallen 15 percent.

Many young adults are holding off on taking out car loans, buying homes, or making other economy-stimulating purchases.

These days, it's not a matter of whether students will choose to make good on their promises, but whether they will be financially able to make good on their promises.

By allowing bankruptcy in Atlanta and other regions to help students most in need, some politicians hope to stave off what's seen as the next big economic bubble.

Of course, even if a bill is approved, it will only apply to private student loans - not the government-backed loans that account for 90 percent of student debt. With as many as 27 percent of borrowers already delinquent on school loan payments, it may be too little too late.

But while an Atlanta bankruptcy filing can't discharge student debt directly, it may be able to help ease the pain by reducing other forms of debt such as credit card balances and medical expenses.

By lightening the overall load, bankruptcy can make it possible for young consumers to begin heading down the path to a brighter financial future.

Continue reading "Hoping to Ease Student Debt, Legislators Propose New Laws for Bankruptcy in Atlanta, U.S." »

Bankruptcy was created to help Americans relieve the burden of impossible debt. Yet for the past 7 years, there was one important type of debt it couldn't ease: student loans.

But some legislators are bent on changing that, according to The Wall Street Journal.

In 2005, Congress revised bankruptcy laws to exclude the discharge of debt from education loans, except in rare circumstances. The theory was that, without collateral like homes and cars, young graduates would find it all too easy to walk away from their obligations if bankruptcy was a possibility.

What Congress couldn't foresee was just how out of control the student debt crisis would get within the next decade.

Earlier this year, the collective total of education loan debt reached the $1 trillion mark, higher than the nation's collective credit card debt.

Meanwhile, college graduates are finding it difficult to make payments. It's estimated that 27 percent of borrowers who have begun paying back loans are already delinquent.

Some are referring to the situation as the next big economic bubble. For the many young grads struggling to find decently-paying jobs, paying down debt may not currently be possible. Not surprisingly, young adults are putting off major purchases like homes and cars, which is having an effect on the entire economy.

A proposed bill would allow the most overwhelmed graduates to file for bankruptcy in Tennessee and other states. Unfortunately, even if it passed, it would only apply to a small portion of borrowers - those with private loans from banks and other lenders.

Ninety percent of school loans are government-backed, and therefore wouldn't be eligible for bankruptcy.

However, Tennessee bankruptcy may still offer indirect assistance to students, and families of students, drowning in student loan debt.

By relieving other forms of unsecured debt such as credit card debt and medical expenses, filing for bankruptcy may help debtors better afford loan payments, lower their overall debt burden, and eventually begin rebuilding credit.

Continue reading "Concern About Student Loan Debt Drives Discussion Over New Tennessee Bankruptcy Laws" »

Bankruptcy has always been intended for Americans who need help breaking free from the burden of overwhelming debt.

Yet, since 2005, bankruptcy protection has been unable to help those with certain types of debt - namely, student loans.

Now lawmakers are debating whether bankruptcy laws in Chicago and other areas across the U.S. should be revised to include some education loans, according to The Wall Street Journal.

In 2005, Congress rewrote bankruptcy laws to ban the discharge of student debts through bankruptcy, citing concerns that new grads with few assets to lose would be too tempted to walk away from obligations.

Since then, skyrocketing college costs and increasing reliance on debt have created what some have termed the student loan bubble.

Even after adjustments for inflation, the average student debt load of new grads increased 24 percent between 2000 and 2010 to $16,932 - and many law and medical school students have debt burdens in the hundreds of thousands.

This year, collective student debt in the U.S. hit $1 trillion - more than our country's collective credit card debt.

Its weight is dragging down not only college students and their families, but the entire economy, as young consumers are unable to find jobs and, as a result, afford homes and cars.

It's no longer a question of whether students will be encouraged to walk away from their obligations if we help them, but whether they'll be able to survive financially if we don't.

New legislation would make it easier for college grads to reduce extreme debt. However, it would only apply to loans issued by private lenders like banks - not the government-backed loans that currently make up 90 percent of student debt. Politicians fear taxpayers would balk at picking up the tab if students were to default on loans handed out by Uncle Sam.

But while Chicago bankruptcy might not be able to directly relieve student debt, it can still relieve the burden faced by some young consumers.

College students and the relatives who have helped fund their education can free up money for education loan payments by reducing other forms of debt through bankruptcy - primarily credit card debt.

Those with large payments - whether for an education loan or a mortgage - tend to rely on credit to fund many everyday purchases. Filing for bankruptcy can help ease credit card debt, protect assets, and improve finances, making life with student loans a little easier.

Continue reading "Could Revised Chicago Bankruptcy Laws Ease Student Debt Bubble?" »

Our debt problems are beginning earlier and earlier.

As recent news stories have illustrated, American students collectively hold one trillion dollars in student loan debt. In addition to school loans, most recent graduates leave school with the burden of credit card debt and car loans.

While this is bad news for young adults, it's also bad news for parents and grandparents.

Because few lenders are willing to take a risk on teens and 20-somethings with little credit history, adult relatives frequently co-sign credit cards and loans for young adults.

While co-signing is one way to help your child establish credit, it can backfire if your son or daughter can't make payments. In fact, co-signed loans are one reason that more Georgia residents are seeking protection through Atlanta bankruptcy.

A recent Business Insider articles estimates that three out of four borrowers defaults on loans, leaving the co-signers liable.

It's not that today's youth are especially irresponsible; it's just that, in today's economic climate, it's impossible to guarantee a young adult will have the income to make pricey payments. Tuition and the cost-of-living are skyrocketing, while jobs for students and new grads remain scarce.

If circumstances prevent the primary borrower from paying back the loan, the co-signer becomes responsible. As a result, lenders can go after your house, car, and life's savings. Meanwhile, the good credit you worked your entire life to build can quickly disappear. Your child will also suffer from a lowered credit score, but you'll be the one pursued by bill collectors.

Bailing out our children does nothing to teach them about managing money. In many cases, a more realistic solution is to lend a loved one money directly (if you can afford it, of course), reducing the need for an outside lender - and reducing the risk of credit damage and liability in the instance of a default.

For young adults over their head in credit card debt, filing for bankruptcy in Atlanta can offer a chance to start over on the right foot. Chapter 13 bankruptcy protection can reorganize debt with a payment plan, preventing default and protecting the co-signer.

Student debt poses a challenge because it is not eligible for release with bankruptcy. However, because bankruptcy can reduce other forms of debt, it may be able to free up funds for making school loan payments.

Young adults must often make financial mistakes to learn how credit really works. However, as adults, we shouldn't be paying for our kids' mistakes. If you're burdened by debt, whether it's someone else's or your own, Atlanta bankruptcy may provide relief.

Continue reading "Co-Signing Parents Left with Credit Damage and Debt Turn to Atlanta Bankruptcy" »

Most parents would do anything to help their kids succeed. But by co-signing loans for young adults, many families are unintentionally making things more difficult.

Despite everything Americans have learned in recent years about having too much debt, we are putting our kids under immense pressure to borrow money.

With tuition rising rapidly, most students don't believe they can achieve an education without taking out student loans. With the cost-of-living high and the number of job positions low, young adults are making ends meet with credit cards. And when it comes time to buy a car or home, many young people can't gain approval without assistance.

As a result, more students are asking for help from moms, dads, grandmas, grandpas, aunts, and uncles, say Tennessee bankruptcy lawyers. By co-signing loans, these adults believe they can help their young relatives attain financing and establish a credit history.

But the benefits of borrowing are quickly erased when the primary borrower - the person you co-signed for - cannot afford to pay back the money.

According to a recent Business Insider story, as many as three-quarters of all co-signers are left to foot the bill after the primary borrower fails to make payments. Many must file for Tennessee bankruptcy in order to regain control over finances.

Not all young people who default on loans are recklessly irresponsible. In fact, many are intelligent and motivated young adults who simply haven't been able to achieve the income necessary to keep up with their bills in today's economy.

When your name is attached to their credit card debt or loan, you are liable for making any payments they cannot afford. In the case of a default, your credit score, home, and life savings will be at risk. In fact, a growing number of parents are facing foreclosure as a result of providing financial help to their children.

Not only can co-signing loans have negative consequences for parents, but it also causes trouble for young borrowers.

Many young people learn to use credit before they learn to use cash, making it impossible to understand important concepts such as budgeting and saving.

With poor credit scores from the get-go, young adults are unable to qualify for loans or forced to accept ridiculously high interest rates.

If you can afford to part with the money, making a personal loan is a lower-risk option because, unlike with co-signing, a default won't be reflected on your credit score. If the damage has already been done and you're suffering the consequences of a co-signing gone bad, bankruptcy may be able to help.

Chapter 13 bankruptcy can allow the primary borrower to make payments over a period of time, preventing default and protecting the co-signer. If lenders agree to release you from liability, you may be able to file for bankruptcy yourself.

While Tennessee bankruptcy can't be used to discharge student loans, it can free up money by reducing or eliminating credit card debt and other unsecured debts.

Continue reading "Parents Who Co-Sign for Kids May Be Stuck With Credit Damage, Tennessee Bankruptcy" »