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Student loans a big factor in personal bankruptcy filings

Although the number of bankruptcy filings nationwide have fallen, the per capita rate of bankruptcy filings in Kentucky are above the national average, ranking eighth in the number of bankruptcy filings. Many times, a combination of student loan debt, stagnate wages and underemployment are at the root of a bankruptcy filing.

According to the National Bankruptcy Institute, debtors are unable to cope with credit card debt and their mortgages, due to loan restrictions and federal housing modification programs. However, too many people work at jobs that scarcely pay enough to support them and their family. Moreover, many people do not have the education or training necessary to obtain a job that pays more money. People in this situation might be able to keep up with their monthly bills, but should some unexpected expense arise, such as a medical bill or a car repair, they do not have the means to cope with it.

According to bankruptcy tracking experts, student loans play a big role in the number of bankruptcy filings. Over 44 million people in the United States have student loans, which is now over $1.3 trillion.

Across the nation, only mortgages outstrip this number. And, student loan delinquencies (that is, payments that are past due by 90 days or more), have increased almost two-fold since 2003.

A person's debt simply does not match a person's earning ability. In addition, student loan payments might be postponed by a Chapter 13 bankruptcy, but in general, they are rarely discharged through bankruptcy. In fact, there are laws in place to ensure that discharging student loans is rare.

While this picture may seem bleak, remember that filing for bankruptcy is often the best solution for those facing substantial debts that they simply cannot afford. It gives filers the fresh financial start they need to put these debts behind them and move forward. By filing for bankruptcy, many debtors are able to wrest control of their finances, so they can better manage them in the future.

Source: Courier-Journal, "Done in by debt: Bankruptcy plagues Kentuckiana," Grace Schneider, Nov. 28, 2016

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