As the economy continues to worsen, more and more people are filing for bankruptcy protection. When someone says “personal bankruptcy,” the image of a person from a lower economic position generally comes to mind, but today more than ever the numbers of college graduates filing for bankruptcy protection is increasing steadily.
While federal student loan debt is not generally dischargeable in bankruptcy that is not the issue. Many of the “college graduates” who are filing for bankruptcy have already paid off their student loans. Many more people with college degrees are finding themselves without a job and unable to find employment despite being overqualified for a position.
It would not be a surprise to many that 70 percent of debtors in a study conducted by the Institute for Financial Literacy did not have a college diploma. The surprising fact may be that the number of college graduates who filed increased by an incredible 20 percent.
The study looked at debt filings from 2006 to 2010 and found that there was a gradual shift in the income of those filing for protection, a shift that moved towards higher income earners. In 2006, 5.5 percent of the debtors brought in an income of over $60,000. By 2010, that percentage had increased to nine.
While bankruptcy may seem fearful to some, others are using it as a tactic for their future. Filing bankruptcy can actually present an advantage for people struggling financially by giving them the opportunity to change a situation whether it was caused by an upside-down mortgage or unemployment before they go further into debt.
Source: CNN Money, “Bankruptcy among college grads grows,” Aaron Smith, Sept. 13, 2011