For many Americans struggling with overwhelming debt, the single biggest obligation they face is student loans. Unfortunately, it is extremely hard to discharge student loan debt in bankruptcy. Here are the limited circumstances when you may successfully rid yourself of such a debt.
Do You Qualify for the “Undue Hardship” Exception?
The only way you can successfully discharge student loan debt is to demonstrate to the bankruptcy court that repayment would constitute “an extreme hardship.” The test most commonly used by the courts was set forth in Brunner v. New York Higher Education Services Corp., decided in 1987. Under Brunner, the court will use three factors to determine whether repayment of the student loan obligation would bring about an undue hardship:
What is the “Totality of Your Circumstances”?
Other courts adopt a less rigid test, instead looking at “the totality of the circumstances.” Under this test, a court will typically not give inordinate weight to any factor, but will try to determine, given all the facts and evidence related to your current and prospective financial health, whether requiring you to pay the student loan would create an undue hardship.
Restructuring Student Debt through Chapter 13
It is generally much easier to enter into a repayment plan for student loans, where you agree to repay the debt over a three-to-five-year period. Any amount still owed after the Chapter 13 is completed will not be discharged, though.
What Is Perjury? What Must the Prosecutor Prove? What Are the Penalties? In the legal system, oral and written testimon... Read More
What Is a Protective Order? What Is a Restraining Order? When Are They Commonly Used? You've been a victim of domestic ... Read More
What Is a Lawsuit Loan? How Do They Work? What Are the Risks Involved? If you've been hurt because of someone else's wr... Read More
How It Works