LOS ANGELES BANKRUPTCY BLOG
Increase in Personal Bankruptcies Involving Student Debt
Feb 17, 2012
According to a survey of the National Association of Consumer Bankruptcy Attorneys, there has been an increase in the number of personal bankruptcy filings involving persons with student debt. Student loans are increasingly becoming a factor in the number of people, especially young persons, deciding to file for personal bankruptcy.
According to the survey, more than 80% of bankruptcy lawyers across the country have seen a similar spike in personal bankruptcies due to student loans. At least 50% of all the lawyers in the study had found a significant increase in the number of cases involving student loans. At least 25% of the attorneys in the survey had seen an increase of between 50% and 100% in the number of potential student loan bankruptcies, and 39% of bankruptcy attorneys in the study reported increases of between 25% and 50% in such cases.
In 2010, the average student loan debt in the United States was more than $25,000. That was the first time that California bankruptcy attorneys found student debt crossing the dreaded $25,000 dollar mark. In 2010, there was also an increase in the average student loan debt for graduating seniors, registering at $25,250, an increase of 5.2% from 2009.
Part of the increase in student debt is due to the fact that many students are now graduating with tons of debt, and not enough job opportunities in a dismal job market to pay off that debt.
The challenge in personal bankruptcies involving student debt is that student debt cannot be easily discharged when a person chooses to file for personal bankruptcy. Unlike other kinds of debt like credit card debt, these loans cannot be written off as easily. Worried by the increasing specter of personal bankruptcy for students who are graduating with huge loans, the federal administration has recently been acting to tackle the problem of student debt.
