Student loan debt may be a major factor in some Maryland bankruptcy filings even though those obligations generally cannot be discharged. A study by the company LendEDU found that almost one-third of people who filed for Chapter 7 bankruptcy had outstanding student loans. Almost half of the total debt of that group on average was student loans. This means that even after these consumers file for bankruptcy, they still must pay off a substantial part of their debt load.
The study only looked at Chapter 7 filers and not people filing for Chapter 13 bankruptcy. With a Chapter 13 filing, people make an arrangement to pay off their debts over a period of three or five years. People with student loan debt who file for bankruptcy may have significant other obligations, such as credit cards and medical bills. They may then use the money they would otherwise have used for those debts to put toward their student loans.
Student loan debt has reached an all-time high of $1.5 trillion. Tuition costs have skyrocketed in recent decades, and the average student loan debt for 2018 graduates among those who took out loans was nearly $30,000. Graduates must work many more hours to pay off student loans than baby boomers did.
There are a few other types of debt that generally cannot be discharged in bankruptcy, such as child support. However, a Chapter 7 bankruptcy can still give people a fresh financial start, and they can begin rebuilding their credit after filing. Filing for bankruptcy is a complex process, and inaccuracies may delay the filing. An attorney may be able to assist a person in reviewing the options for debt relief and determine if bankruptcy seems to be the best one.