Being overwhelmed by debt that seems insurmountable is not an easy place to be. If you are in student loan debt and are also considering bankruptcy, it’s important to learn about your options and not give up hope. Getting student loan debt discharged in bankruptcy is difficult, but not impossible. In fact, student loans may be dischargeable if they cause undue hardship.
The Brunner Test
The relationship between bankruptcy and student loans is a complex one. In trying to better understand these complexities and determine whether it’s possible for your student loan debt to be discharged in bankruptcy, it’s important to understand the Brunner Test.
Since Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, it’s become much more difficult to get federal or private student loans discharged in bankruptcy when compared to other types of debt. They can, however, still be discharged if the borrower can prove the loan causes undue hardship.
While undue hardship is a rather arbitrary term that can be defined by the courts in various ways, borrowers often need to pass the Brunner Test in their efforts to have their student loans discharged in bankruptcy. This legal precedent is based on a 1987 federal court decision and often serves as the benchmark for determinations of bankruptcy and student loans. The three aspects of this test dictate that you must prove:
- You can’t maintain a minimal standard of living for yourself and your dependents based on your current income and expenses.
- Your financial situation isn’t likely to change during your loan’s term.
- You’ve made good faith efforts to repay the loan.
Other Important Factors Between Bankruptcy and Student Loans
In trying to prove that your student loans pass the Brenner test, and prior to seeking the legal advice of an attorney, it’s also important to consider:
- It Could Matter Whether Your Student Loans Are Federal or Private – Federal loans offer Income-Driven Repayment Plans (IDR), and their low (or even $0/Mo) monthly payments could make it more difficult to prove you are under undue hardship.
- Your Budget And Job Prospects May Be Determining Factors– Large and small aspects of your budget will be scrutinized in cases of bankruptcy and student loans. Examine your budget to get a better idea of whether or not you have a good chance of being able to prove your case.
- Some Private Student Loans May Be Exempt From The Undue Hardship Requirement– Factors such as attending a non-accredited school or borrowing more than the cost of attendance may help your case.
Trusted Attorney Advising You on Bankruptcy and Student Loans
If you are struggling to afford your student loan debt, contact the attorneys at Parker & DuFresne. We provide compassionate guidance for those struggling to make ends meet. We understand, and we can help. Contact us today.