Bankrupt at 23
Living at home, I got a job in the admissions office at a local college, which didn’t cut it financially, even if I was living rent-free at my parents’ house.
So I decided to file for bankruptcy.
A friend of the family suggested the idea. As the friend, who worked in finance, explained, there was no way I was going to get ahead money-wise if I didn’t try to wipe clean the slate of my “youthful mistakes,” and start anew.
Initially, I was completely against this, as were both my parents.
But, this friend explained, the debt had gotten so out of control I’d have to start making well over $100,000 stat (and still live with my parents) to just get even with the creditors. All that before I could even start dealing with my student loans!
After the judge approved the bankruptcy, I walked away with a clean slate … and the inability to have credit cards for the next seven years. It seemed like a fair deal considering what I had done, so I reveled in the weight that had been lifted. I also felt embarrassed it had come to that point.
Over at LearnVest, a writer recalls what it was like to file for bankruptcy at the age of 23 after incurring more than $25,000 in credit card debt. Things she doesn’t mention: That filing for bankruptcy is not exactly easy, and lawyer fees can be costly, so even if your consumer debt is discharged (student loans cannot be discharged), you’ll still have to pay your lawyer. Also, your credit will hit bottom, and the bankruptcy filing will stay on your credit for at least seven years, making it difficult to apply for any sort of credit (credit cards, education loans, a mortgage, etc.) for a long time. Nevertheless, filing for bankruptcy is one of those last resort options that are available to you if you need it. Just make sure you find a lawyer you can trust.
She’d have to make over $100,000 a year AND still live at home? For $25,000 of debt? That can’t be right.
@Megano! That’s what I was about to say. Was this money borrowed from the Mafia? Is that dischargeable in bankruptcy? I mean, I’d expect the Cosa Nostra to be more forgiving and flexible than, say, a private student loan lender, but only slightly.
@Megano! Seriously, that’s ridiculous.
I don’t understand why she didn’t looking into debt consolidation or credit counseling…? Yes, $25,000 is a whole lot in credit card debt, but I know people who’ve had a ton more (and definitely weren’t making $100k+ per year), but were able to consolidate and negotiate lower rates, and pay it off bit by bit.
I don’t like to be judgmental about other people’s financial choices, but this seems really irresponsible. Yes, you take a hit to your credit, and some trouble can come from that (although it looks like she avoided that by renting a place with a roommate and having the roommate’s name on the lease); but this just seems like running away from the problem and not really facing the consequences of spending so outrageously.
@Sarah H. Phew, I felt the same way! I didn’t want to be too judgey, but damn, girl, look at your life; look at your choices.
@lobsterhug You know, I agree, but I’m also glad she wrote about her experience. I’d love to see a more balanced view: someone who wrote about why they did it, and talked about both pros and cons (and what life was like afterwards). I’d definitely like to hear from someone who has both gotten their life back on track and at least mostly doesn’t regret going through the process.
“Just make sure you find a lawyer you can trust.”
aka, “Don’t use a bankruptcy lawyer who advertises on TV.” Seriously. I mean it.
I’ve seen people who filed bankruptcy with total dischargeable debt of about 3 months gross salary, no house to save from foreclosure, no student loans, no big car note. People file bankruptcy for all sorts of crazy reasons, usually based on bad advice, like Ms Chatel got. Always remember, just because something worked out for someone, sometime ([cof]dropping out of Harvard[cof]), doesn’t mean it will work out for you.
@@fo What three months gross salary??? Really, thats no money at all.
@chic noir
Yeah, three months gross salary of credit card & medical bill debt. Filed chapter 13, completed the plan, which meant he paid back about 90% of the principal he owed when he filed. If he hadn’t had to pay a lawyer, and pay the bankruptcy trustee, it would have been 100%. What he saved was interest and late fees over that repayment.
ps: 18 months ago, she wrote this:
“I had been trolling Craigslist for weeks. My job as an office manager wasn’t paying the rent, and my long-deferred student loans were piling up in my mailbox. Despite looking for administrative positions that paid twice what I was making, I kept going back to “Egg Donors Needed.”"
So it hasn’t exactly been sunshine and unicorns since the chapter seven.
http://www.lemondrop.com/2010/10/14/egg-donation-i-tried-to-sell-my-eggs-but-got-rejected/