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Home » Bankruptcy » Dis­charg­ing Stu­dent Loans in Bank­ruptcy: Some Good News

Dis­charg­ing Stu­dent Loans in Bank­ruptcy: Some Good News

January 29, 2020 by Shae Irving

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:

  • edu­ca­tion
  • 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.

More Infor­ma­tion

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.

Filed Under: Bankruptcy, Student Loans

About Shae Irving

Shae Irving has been writing for Legal Consumer since 2013, focusing on health care and family law. She was a senior legal editor and editorial project manager at Nolo, where she worked for twenty-two years. Shae has degrees in rhetoric and law from U.C. Berkeley. She lives in Northern California.

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