Getting student loans discharged in a Chapter 7 bankruptcy case isn't easy. You'll need to convince the bankruptcy court that you're struggling financially and that your situation is unlikely to change. Using legalese, you must show that repaying your loans would cause you "undue hardship."
Many courts use a three-factor test, called the Brunner test, to determine if you can meet the undue hardship requirement for student loan discharge. However, not all courts use this test.
Some bankruptcy courts will look at the totality of the circumstances. If the bankruptcy court uses the totality test, you'll be able to include all factors relevant to your hardship argument.
Below are the factors the bankruptcy court will consider when using the Brunner test.
The three-factor Brunner test helps the bankruptcy court determine whether you should continue paying your student loans. If doing so would cause undue hardship, the bankruptcy court will "discharge" or erase some or all of your student loan debt.
Here are the three factors the bankruptcy court will consider under the Brunner test:
To pass the Brunner test, you must successfully prove the following three things.
Most courts are reluctant to discharge student loans through bankruptcy, whether they use the Brunner test or apply other factors. However, if you are 50 or older, likely to remain poor for the rest of your life, and tried hard to pay off your loans, you might be a better candidate for student loan discharge.
Be sure to explore other ways to reduce your payments. For instance, you might extend your payments over a longer time, get a temporary break from payments called "deferment" or "forbearance," consolidate loans for a lower interest rate, or cancel loans based on other factors.
To learn about government programs for repayment, deferment, forbearance, discharge, or consolidation, check out the student loan debt articles or visit the National Consumer Law Center's Student Loan Borrower Assistance Center.
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