Study: young adults likely to languish in debt

A recent survey suggests that the recent difficult economic times may have had an effect on the spending habits of young Americans. Specifically, it has discouraged them from obtaining credit cards.

According to the survey from Sallie Mae and Ipsos Public Affairs, 39 percent of undergraduates between the ages of 18 and 24 said that they owned a credit card in 2012. This marks a 10 percent decrease from two years earlier.

Data from the Federal Reserve also found that young adults who have credit cards are not carrying as high of balances as their older counterparts did when they were in college. The median credit card balance was $1,700 in 2010, compared with $2,500 in 2001. These findings are blamed on weak job prospects for young Americans, stagnant wages and stricter lending rules that arose out of the 2008 recession.

Although carrying less credit card debt may seem like a good thing, a separate study from Ohio State suggests that the financial health of the young is not as rosy at it might appear. The study surveyed borrowers from 18 to 85 and found that young people carry more debt than their elders and pay it off more slowly.

The study predicts that millions of these young Americans will continue to carry a balance into their 70s, many dying in debt. The study hints that although young people may be carrying less debt presently than their elders did at that age, the debt that they do carry is likely to grow and remain with them for the rest of their lives.

Bankruptcy can help

For people, young and old, who are overwhelmed by credit card debt, bankruptcy can offer a solution. The ultimate goal of bankruptcy is to receive a discharge, which relieves the filer of the burden of paying off many types of debt, including credit cards and medical bills. Typically, those in debt can choose between Chapter 7 and Chapter 13 bankruptcy, depending on their financial situation.

In Chapter 7, the debtor, or person who filed bankruptcy, surrenders his or her nonexempt assets, which are sold to pay for his or her debt. The sale sounds worse than it actually is, since the majority of Chapter 7 filers have little or no nonexempt assets (e.g. vacation homes and art collections). At the conclusion of the sale, if there is one, the balance of the debtor's debts is discharged.

For debtors with a regular income, Chapter 13 allows the debts to be paid off in monthly installments over a three to five-year period. This includes curing delinquent mortgage and car note arrears, allowing debtors to keep their home and cars. This type of bankruptcy is also applicable. This type of bankruptcy is ideal for those debtors with nonexempt assets that would like to keep their property. Once the installments have been paid, the debtor receives a discharge of most types of debt that were not fully paid during the installment period.

As bankruptcy law is full of exceptions, if you are having difficulties making credit card payments, it is important to speak with an experienced bankruptcy attorney. An attorney can review your debt relief options with you and recommend one that would best fit your particular situation.