I’m 21 with $18,000 in credit card debt, and I’m a full-time college student with a year left to graduate. I’ve been working on paying down this debt for a few months but feel like I’m drowning. I’m considered part-time at work, usually managing 27-30 hours a week but sometimes stretching to 35. I make about $24,000 a year. It feels like an endless cycle—I’m using all my income to pay off credit cards, only to rely on them again because there’s no money left over. My minimum payments total almost $500, which leaves me tapped out. In short, I made some irresponsible financial choices and was never really taught about managing money, and now I’m facing the consequences. My family is suggesting bankruptcy since I have a car and won’t need to make any major credit-dependent purchases, like a home, anytime soon. Is bankruptcy a good option? What are the downsides of this decision? Please be kind—I’m already really upset with myself for getting into this situation. (I’ve also tried debt consolidation and personal loans, but no luck.)
The first recommendation would be to cut expenses and increase your income, throwing all extra money toward your debt, even if it takes several years. However, balancing 30 hours of work a week with college might leave you with little time. Start by evaluating your basic necessities and keep working as much as possible.
Keep in mind that filing for bankruptcy can affect your life significantly for the next five to seven years, and even have some minor impacts later on. While it might seem like a quick solution and can be necessary in certain cases, it should be a last resort.
You could explore the Dave Ramsey method as an option. Just remember that bankruptcy is a big decision, especially at your age, so consider it carefully.
Just so you know, due to my parents’ poor financial choices, filing for bankruptcy will affect you for 6-7 years, but it won’t last forever. Instead, you must address your expenditures and avoid doing it again, as you claim to have learnt (unlike my parents). But that’s a positive thing—my sibling and I learnt from them! I have excellent financial standing! #immigrantparents make many sacrifices.
Bankruptcy could provide immediate relief, but the fact that you’re still relying on credit cards and accumulating more debt is concerning. Once you declare bankruptcy, you can’t do it again for about seven years, and during that time, you’ll likely be offered credit with terrible terms because lenders know you’re unable to file again. If you take on more debt after bankruptcy, it could put you in an even worse situation.
If just a couple of months of working on your debt has already brought you to your breaking point, it’s worth considering whether you have the discipline and perseverance to stay financially healthy after a fresh start. Can you live without using credit? Can you say “no” to things you want but can’t afford? Can you manage your expenses on $24,000 a year? If you’re not able to confidently answer “yes” to these questions, there’s a real risk of falling back into the same financial struggles after bankruptcy.