Two of the biggest sources of debt for most young people are student loans and credit cards.
Los Angeles bankruptcy lawyers know they tend to go hand-in-hand‚ as many college students must rely on loans to be able to afford an education. Credit cards can be a great thing in college‚ too‚ as they can help establish a credit history for someone who is just starting out.
However‚ they are very easy to misuse or abuse‚ especially if you aren’t educated about them‚ and many students get in over their heads. Students between the ages of 18 to 24 have an average credit card debt of about $2‚000.
While student loan debt is typically not dischargeable in a bankruptcy‚ credit card debt is. We have helped countless graduates emerge from a credit card debacle debt-free. As such‚ we have learned a few things that may help your child avoid going down that path. Having a talk with them now‚ as they are just starting the fall semester‚ can ward off major headaches down the road.
First‚ educate them on smart shopping. Of course‚ purchasing new gadgets or clothes that they would not be otherwise able to afford is exciting. It seems like freedom‚ something most new college students are eager for. But this is where major problems can arise. As a general rule‚ try to pay off your card balance every month. Some students use it only for gas and for textbooks – things that are necessary‚ but manageable in terms of payments.
Secondly‚ you may consider helping them to choose a card. If they will be choosing one for themselves‚ make sure they don’t simply sign up for the first offer they receive. Be choosy. Research the annual percentage rate‚ the annual fees (you want one with a low annual fee or none at all) and rewards or cashback programs. Make sure they don’t apply for more than one or maybe two cards. That is what is considered a “hard inquiry‚” and it will negatively affect his or her credit score.
Thirdly‚ show them how to check their credit score‚ as well as to manage it. Understanding that having a high credit score means banks will want to loan to them and can put a student light years ahead of his or her peers. Once the value of a good credit score is understood‚ you can build upon that with tips on how to manage credit.
Fourthly‚ encourage honesty and openness. The last thing you want is to find out three years from now that your child has been overwhelmed with debt. The silver lining in this situation is that a younger person who files bankruptcy will have a good chance of bouncing back relatively quickly‚ and plenty of time to rebuild a credit score and start making better financial choices. Still‚ we certainly understand most parents would rather have their child avoid that route altogether. This is where being able to have regular‚ open discussions with your child about their finances can make a huge difference.
If you are facing bankruptcy in Los Angeles‚ contact Cal West Law to schedule your free consultation. Call (818) 446-1334.