The Brunner Test: How to Discharge Government Student Loans in Bankruptcy
The United States Bankruptcy Code says that Department of Education student loans cannot be discharged in bankruptcy unless you as the bankruptcy filer can show something called undue hardship.
In 1987 a federal appellate court in New York issued the Brunner decision which defined undue hardship. Since that time, most bankruptcy courts considering this issue have followed the reasoning of the Brunner court.
As I discuss in this video, Brunner says that to prove undue hardship you must prove that if forced to pay your student loans, you would not be able to maintain a minimal standard of living and that these financial circumstances are likely to continue indefinitely. Until recently, many bankruptcy courts have read Brunner to mean that if you can afford an efficiency apartment, and rice and beans, you are able to maintain a minimal standard of living.
However, the tide seems to be turning. Some bankruptcy judges are redefining what constitutes a minimal standard of living. Further, the Department of Education offers a variety of income based repayment plans that allow for reasonable repayment plans.
Further, there are some very good arguments that some private student financing falls outside the definition of student loans and thus may be entirely discharged in bankruptcy.
While the United States Congress appears to have little interest in aiding student loan debtors, bankruptcy judges and federal court judges appear to be more willing to address a growing public policy problem of college graduates unable to buy homes, vehicles or save for retirement.
So, if you have a significant student loan debt problem, do not assume there is no hope. #brunnertest #brunner #dischargestudentloans #studentloansbankruptcy
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