The Brunner Test is the standard for approving the discharge of student loan debt for all courts of appeal except for the First and Eighth Circuits. But this standard has become obsolete with its stance on proving undue hardship. While it’s difficult to discharge student loan debt through bankruptcy, it isn’t impossible if you and your attorney can prove undue hardship.
Determining Undue Hardship
The problem with the Brunner Test for determining undue hardship is the case was decided during a period of time when you could discharge a student loan debt in a Chapter 13. The case was filed as a Chapter 7 and, my opinion, the court found that the debtor should have been able to file a Chapter 13 to at least pay off part of the student loan debt. There is a saying among legal professionals, bad facts make bad case law. While you may qualify for an income based repayment program prior to filing, which may assist in your attempts to discharge the student loan debt, typical student loans are spread out over 10 years, while income-based options are spread out over 20 to 25 years. While income-based repayment amounts are lower, they don’t take the expenses of living into account, including medical expenses or expenses of raising a family.
Using the Brunner Test to determine undue hardship, you must prove that:
- To maintain a minimal standard of living for you and your dependents, you cannot make payments based on your current income and expenses.
- It’s unlikely that your financial circumstances will improve during most of your repayment period.
- You have made a good faith effort to repay your loan(s).
If you’re able to prove undue hardship, your student loan could be forgiven.
What Bankruptcy Can Do for Student Loans
When you file bankruptcy, you receive automatic protection from all collection efforts for all your debts, including student loans until your case is resolved or your lender receives permission from the court to pursue collection efforts.
Having your student loan discharged via the undue hardship process is not automatic through bankruptcy. Ypu must file an Adversary Proceeding, a trial within the bankruptcy filing. If you haven’t requested a determination of undue hardship with your bankruptcy filing, you can reopen your case to file your request.
Contact us to find out if bankruptcy and student loan forgiveness via undue hardship is an option for you.