Common Questions: Attempting to Discharge Student Loans Bankruptcy

You’ve probably heard that it is impossible to discharge student loan debt in bankruptcy. That’s not exactly true, but it is very difficult to convince a court to let you off the hook for your student loans in either Chapter 7 or Chapter 13 bankruptcy. But with more than $1 trillion in outstanding student loan debt out there, more and more people considering bankruptcy are curious about the process.

Bankruptcy Courts Consider Your Ability to Pay Student Loans Under the Brunner Test

Student loans are not automatically lumped in with other debts when you file for bankruptcy. To even get the court to consider whether to discharge your student loans under Chapter 7 or Chapter 13 bankruptcy, you also must file a Complaint to Determine Dischargeability. The burden is then on the debtor to prove to the court that he or she is unable to pay back the loans.

There is currently a circuit split about the standard courts should use when determining whether to discharge student loan debt. Courts in California and the other Ninth Circuit Court of Appeals use what’s called the Brunner test, named after the 1987 case Brunner v. New York State Higher Education Services Corp.

The Brunner test requires the debtor to show an undue hardship in paying back his or her student loans. Specifically the debtor must show:

•    Given current income and expenses, he or she cannot maintain a minimal standard of living if forced to repay the loans.
•    Circumstances indicate that the debtor’s situation is not likely to improve for a significant portion of the repayment period of the loans.
•    The debtor has previously made a good faith effort to repay the loans.

While the Brunner test makes it possible to discharge student loans in bankruptcy, it is still a very high standard. It can be difficult to convince a court that even after discharging all other debts that can be discharged under current bankruptcy laws, such as credit card and tax debts, that the debtor is still unable to pay back his or her student loans. Courts can also be reluctant to believe that the debtor’s current financial situation is likely to persist for years to come.

However, in some instances courts reviewing a Complaint to Determine Dischargeability under the Brunner test will allow for a partial discharge of student loan debt, if not the entire balance. Whether a court decides to do this though is at its discretion.

Thinking About Filing for Bankruptcy?

If you have a large amount of student loan debt and are considering filing for bankruptcy, an experienced bankruptcy attorney can walk you through the process. The Law Offices of Melanie Tavare of Hayward and Oakland can assist you in reducing or eliminating debt through Chapter 7 or Chapter 13 bankruptcy. Contact the Law Offices of Melanie Tavare at 510-255-4636 or online.

The Law Offices of Melanie Tavare is a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.