The cost of higher education has never been higher, and many students may find that -- unlike their parents -- working a part-time (or even full-time) job while attending classes won't be enough to cover the total cost of attendance. Adding steep medical bills or consumer debt to this burden may leave you feeling as though you'll never be able to dig your way out of debt. While bankruptcy is an option for many, most student loans are excluded from the bankruptcy estate. Given this, does it ever make sense to file for bankruptcy protection while you are still a student? Read on to learn more about the pros and cons of this approach.
Why might a student file for bankruptcy?
In some ways, filing for bankruptcy prior to graduation can make sense -- even without the ability to discharge student loans. Because your ability to file either a Chapter 7 or Chapter 13 plan can depend on your income, seeking bankruptcy protection while your income is low can improve your odds of success, especially if you expect your income to substantially increase after your graduation.
Many can also find the prospect of a fresh start at a young age an attractive one -- rather than spending your early career trying to pay off a mountain of debt, you will instead be responsible only for your student loans and other nondischargeable debt.
Are there disadvantages to filing while you're still in school?
Depending upon your chosen career field or profession, filing for bankruptcy while still in school may not always be the right choice. Some fields, especially law and finance, may require job applicants to undergo a credit check before an offer of employment is extended, and having a bankruptcy on your record can affect your ability to find a job.
In other cases, filing for bankruptcy while still in school may be premature. If you are planning on additional schooling, expect high medical expenses in the near future, or are otherwise planning to take on additional debt, you may want to wait. There are time limits on the frequency with which you may file for bankruptcy, and you may find yourself with an even greater debt load a few years down the road -- with no recourse but to wait until you're again able to declare bankruptcy.
If you are considering filing for bankruptcy and are a student, you may want to consult with an attorney, such as Price James S & Associates, to ensure that this is the best option for you at this stage in your life.