Young people in their early twenties, ,of which many are students are becoming a fast-growing number of bankruptcy filers. Bankruptcy and students seems to be becoming a problem, and according to recent surveys, it is believed that teenagers younger than nineteen years of age own at least one credit card of their own. Also, it is reported that two thirds of undergraduate students have a minimum of one open credit card account, and it is believed that the average student graduates owes three to four thousand dollars in credit card debt along with other debts.

Managing Student Finances for the First Time May be a Reason for Defaulting

With more college students being marketed credit cards, it has even made some states enact legislation that limits solicitation to college students and recent bankruptcy reform procedures are also concerned with addressing the problem of bankruptcy and students. The reason behind bankruptcy and students becoming a big problem could lie in the fact that college students are learning to live alone and manage their own money for the first time, and thus find it hard to keep track of their credit card purchases.

According to experts, people tend to shop more with credit cards than when spending cash. When interest, late charges, increase in minimum payments are factored in, it makes for difficulty in managing finances and thus leads to bankruptcy and students becoming a growing malpractice.

Bankruptcy and students loans that are not repaid can often make a student feel as if he or she has just graduated from the school of hard knocks. Bankruptcy is not the escape route that students may be thinking of taking in order to avoid paying back government backed student loans as well as school loans backed by non-profit agencies. These loans are not discharged in a bankruptcy and have to be paid back after bankruptcy, though if a student can prove (very difficult actually) that the loan constitutes a considerable hardship, it can be got rid off without repayment.

Student loans, under normal circumstances, cannot be discharged under any chapter of the Bankruptcy Code. By using loopholes in government legislation, bankruptcy seems to offer an escape route to avoid paying off student loans, and the number of students that used bankruptcy to avoid paying off their debts increased dramatically over the recent past few years.

The bottom line is that it is the bankruptcy judge that has the final say, and for the lucky student, the odd bankruptcy judge may allow him or her to discharge the loan by filing for bankruptcy. Lenders too, cannot send their bills to a student who is in bankruptcy and need to wait till the case is decided. Often, it is better for the student to deal directly with the lender and find a mutually agreeable way of settling the debt, rather than going in for bankruptcy to avoid repayment.