"Millennials," "Echo Boomers," "The Net Generation" and "Generation Y." Over 50 million American teens and twentysomethings strong, this age group has been called many things — and and the people who make it up are regularly predicted to be less successful and less financially well-off than their parents. As indicated in a recent report by the think tank Demos, many members of Generation Y are already in some degree of financial difficulty due to high debt load, minimal savings and limited job opportunities.
Even though many might consider themselves too young to consider it, filing for bankruptcy may provide members of Generation Y with a way out of seemingly insurmountable personal debt.
What is bankruptcy?
Bankruptcy refers to the judicial process determining the inability of an individual or organization (or "debtor") to pay back financial obligations. The legal proceedings transpire in one of two ways: in an involuntary bankruptcy, creditors (e.g., banks, lending institutions) file a bankruptcy against a debtor to recover monies owed. More common are voluntary bankruptcies, where debtors declare their inability to pay their debts.
Bankruptcy allows debtors facing financial hardship an opportunity to start over and helps creditors collect what they are owed in an equitable manner.
Bankruptcy types and definitions
Those looking to file for personal bankruptcy most often choose to file under either Chapter 7 or Chapter 13 of the bankruptcy code. Each one has its own requirements and benefits and an experienced bankruptcy attorney can help you determine what is right for you.
Chapter 7 allows a debtor to liquidate his or her property and assets to settle debts. A court-appointed trustee is tasked with valuing and selling the debtor’s possessions and uses sales proceeds to pay down the accumulated debts. Any remaining debts are forgiven (or "discharged") by the creditors.
A discharge in bankruptcy ends the personal liability of a debtor for certain types of debts. Creditors can no longer make any additional debt collection efforts (such as telephone calls and letters) on any remaining balances.
Chapter 13 allows a debtor to reorganize his or her debt, which allows the debtor to retain some or all property and assets. Also called a "wage earners plan," this allows gainfully employed debtors to pay back all or part of the accumulated debt through a court-approved repayment plan.
It is important to note that while student loans are non-dischargeable in bankruptcy – which means that they cannot be totally eliminated by filing for bankruptcy – they can be consolidated under Chapter 13.
Should I File for Bankruptcy?
The decision to file for bankruptcy can be a difficult one. No two cases are exactly alike and there are many factors a debtor should discuss with an attorney when considering bankruptcy as an option.
If the answer is yes to one or more of the following, you might be a candidate for filing bankruptcy:
- You receive regular telephone calls and mailings from creditors about missed and past-due payments
- You suffered a measurable financial setback (i.e. unemployment, divorce, disability, illness)
- You are only able to pay the minimum amounts due on your outstanding debts
An experienced bankruptcy attorney can provide more information about whether filing for bankruptcy is right for you and what alternatives may be available. If you or someone you love is facing financial hardship, contact a lawyer experienced in bankruptcy today.