Did you know that law students are borrowing approximately $106,000 for private schools or $70,000 for public schools? Furthermore, all of this is occurring at a time when there are practically no legal jobs. Many Florida residents understand that the economy is steadily rising; nevertheless, people continue to suffer from the terrible job market. A recent story discusses the financial woes of a Maryland law graduate. She has recently filed for liquidation.
Right before her law school graduation, the law student realized that she was burdened with $150,000 in student debt. With no job prospects on the horizon, she decided to file for Chapter 7 personal bankruptcy. Filing Chapter 7 bankruptcy allows individuals to discharge debts such as credit card bills, lawsuit judgments and medical debts. Like many recent law graduates, this woman thought it would be easier to obtain a job. However, the former student currently lives with her mother as she scraps for sporadic contract positions.
Unfortunately, this new lawyer found out that federal law prohibits courts from discharging student-loan debt. There is an exception in situations where repayment would be an “undue hardship.” Nevertheless, this is a very difficult legal standard to fulfill.
While there are no statistics that report exactly how many law students are declaring bankruptcy, sources say that the average law-school debt has increased 50 percent between 2001 and 2010. Additionally, the debt is now exceeding a graduate’s typical earning potential.
While a recent study suggests that consumer bankruptcies were actually down by 11 percent in 2011, student-loan default rates show that law graduates have not benefited from the trend. Also, filings increased among college graduates by 20 percent between 2005 and 2010.
As one can see, the recent economy has hampered a lot of students. In the face of such a serious financial crisis, many people are opting for bankruptcy. If you are considering liquidation as a debt-reducing remedy, you may want to speak to an attorney about the various filing possibilities.
Source: Reuters, “Law grads go to court for bankruptcy protection,” Leigh Jones and Moira Herbst, Feb. 3, 2012