It’s a tough market for recent college grads and other young adults. Many are having difficulty finding work or are underemployed and are faced with a mountain of debts. It’s tempting to move back home, but there are some drawbacks.
If your parents are willing to support you (temporarily, one hopes), and you can pay off your debts in a few months, go for it. Just don’t overstay your welcome. Now that you’re an adult, you’re a guest.
If you are thinking about filing bankruptcy, there are some things to keep in mind.
First, student loans are not dischargeable in bankruptcy (although if you have some income, you can work out a payment plan that’s not too burdensome.)
Second, if you want to file in Chapter 7 and discharge all of your (dischargeable) debts, you will have to pass the infamous “Means Test.” Two important factors in this test are household income and your ability to pay your debts. What is considered a “household” for these purposes depends on how the court views your situation. If you are paying rent and other necessities, you may be considered a renter and be treated as a separate household. On the other hand, if you are completely dependent on your parents, it would probably appear to the court as a single household. This would require inclusion of your parents’ income in applying the Means Test. The bankruptcy case would not otherwise involve them, but they would have to disclose information about their income. The second concern is that if you have some income but are not incurring living expenses, your budget will look like you have enough money to pay at least some of your debts.
If you are in an apartment and over your head in (dischargeable) debt, and you are considering bankruptcy, you probably should stay put if you can. Chapter 7 is especially attractive for people with a lot of debt and a low income who expect (or hope!) to land a good-paying job in the near future. If you wait until after you get that job, if your income is high enough, you may be forced to file a Chapter 13 and make at least partial payment of debts that would otherwise have been completely discharged in a Chapter 7.