Student loan debt can feel insurmountable for many, especially when combined with additional financial challenges. Although bankruptcy can offer a fresh start for many forms of debt, student loan debt is more complicated.
You should understand your options for seeking student debt relief through bankruptcy.
You can not discharge most student loans
The U.S. Bankruptcy Code excludes most education loans from discharge. Successfully discharging student loans requires a borrower to demonstrate undue hardship resulting from their repayment. The term varies in interpretation, making it challenging to prove.
The Brunner test is a widely used benchmark
The Brunner test defines criteria that illustrate undue hardship.
- Unable to maintain a minimal standard of living during repayment
- Unlikely to see financial improvement in the foreseeable future
- Made a good faith effort at repayment
Many bankruptcy courts use this test as a benchmark for determining eligibility, though it is not a standardized requirement.
You need to initiate an adversary proceeding
For the court to consider a student loan discharge in your bankruptcy, you must request an adversary proceeding. This establishes your claim against the loan servicer so that you can illustrate undue hardship to the court.
One of the most common misconceptions about bankruptcy is that the law prohibits discharging student loans. More than 43 million Americans have student loans, and the increasing financial challenges of meeting those obligations have cast the spotlight on bankruptcy as an avenue for relief. Understanding the undue hardship standards helps you prepare for your case.