Young people & debt: How does it affect lives?

What is bankruptcy?

Personal bankruptcy can be generally defined as a legal process that either eliminates or discharges the debts of an individual, or provides a mechanism for some percentage of a person’s debts to be repaid over three to five years.

How does debt affect lives in the short- and long terms?

Too much debt will have both short- and long-term impact on young lives. When applied to for credit, banks or other lenders look at the percentage of debt as compared to assets. So if, for example, a young person is looking to buy a home, the amount lent will be based upon the value of the home, the individual’s credit worthiness (ability to repay the loan) and credit history. In the long term, bad credit will cost the person money—higher interest rates will be charged. If an individual has to file for bankruptcy, the bankruptcy will stay on the person’s credit report for up to 10 years.

Source: Lori Simpson is a partner with Bishop, Daneman & Simpson in Baltimore and a Baltimore Chapter 7 Bankruptcy Trustee.  She can be contacted at lsimpson[at 

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