Getting rid of student loans in bankruptcy is difficult—but it’s not impossible. A recent NPR report highlighted research showing that about half of bankruptcy filers who ask the court to erase their student loans get help. And that percentage has been climbing.
To discharge student loans in bankruptcy, you must convince a judge that repaying your student loans would cause you “undue hardship.” So the rising number of successful cases suggests that more judges are now interpreting bankruptcy rules in favor of those struggling with student loan debt.
Bankruptcy and Student Loans: What Is Undue Hardship?
Because the U.S. Bankruptcy Code doesn’t define undue hardship, judges use a variety of factors to decide whether your circumstances qualify. These often include:
Poverty. If you can’t pay your loans and maintain a “minimal” standard of living, you may meet this standard. The court will look at your income and expenses, but may also consider factors such as:
- potential for employment and income
- health, and
- family support obligations.
Persistence. To meet this standard, you must show that the condition of poverty will continue for the life of your loan.
Good faith. It will help your case if you can show that you’ve made a good faith effort to repay your loans but that circumstances—illness, injury, or a long-term lack of employment options—have made repayment impossible.
Policy. Some courts may look to see whether you filed for bankruptcy for reasons other than simply getting rid of your student loans. Others may want to see that you haven’t made financial gains due to the education you got from the loans.
The first three factors are part of what’s called the Brunner test, which many courts use to decide whether to discharge student debt; you’ll probably read and hear more about that test as you investigate whether bankruptcy is a good option. But not all courts use the Brunner test. If you want to find out the factors most commonly considered by courts in your area and how they’ve been ruling on cases, it’s wise to talk to a qualified student loan lawyer.
Finding a Lawyer to Help With Student Loans
You may be able to handle an undue hardship proceeding on your own, but it takes more work than a typical bankruptcy proceeding. And most people find it stressful or even overwhelming to face an adversarial situation in which they are required to prove their own weaknesses. A good lawyer will help you understand what’s involved in filing a student loan discharge petition and should be able to give you an idea of whether your case is likely to succeed.
Lawyers will sometimes reduce their rates for work related to student loan debt. Or they may even agree to help you with just the student loan portion of your case.
For tips on finding an attorney, see How to Find a Student Loan Lawyer.
Don’t forget to thoroughly investigate other options—such as deferment, forbearance, or loan forgiveness—that could get you payment relief without a bankruptcy filing.
To learn more about filing for bankruptcy, see Legal Consumer’s bankruptcy learning center.