How to Discharge Student Loans in Bankruptcy

Student loans are now the number one source of debt in the nation, outweighing credit card debt for the first time. Though many struggle to pay back the nationwide $1 trillion owed for higher education, there is very little relief offered. In fact, some would say it’s almost impossible to have student loan debt forgiven. Only 0.1 percent of those who filed for bankruptcy were able to successfully have their student loans discharged.

While it’s very difficult, those facing undue hardship can file a petition to have their student loan debt discharged. Instead of a regular bankruptcy filing, people must pass the Brunner test to have their loans written off.

The Brunner Test & Student Loans

Filing for Chapter 7 or Chapter 13 bankruptcy is not enough to wipe out student loan debt. Instead, you must successfully prove that it would be an undue hardship to you to repay them. To determine whether or not it would be an undue hardship, courts employ what is known as the Brunner test. Only through passing the Brunner test could bankruptcy discharge your student loan debt. There are three criteria that must all be met to pass the Brunner test. They include:

1. Poverty. To successfully seek a discharge through bankruptcy, you must be able to prove that your current income and expenses make it impossible for you to pay back student loan debt. Remember that there’s a difference between having “difficulties” paying back your loans versus truly living in poverty.
2. Persistence. In other words, is your current financial state likely to change or will it persist throughout the duration of your student loan repayment period? If it persists or has persisted, you’re most likely to obtain a discharge through bankruptcy.
3. Good effort and faith. The courts will not discharge student loans just because it’s difficult to pay them back. You must be able to prove that you’ve done all you can to be able to pay them back. Once you’ve exhausted every option and can prove that they are an undue hardship, the court may consider discharging your student loan through bankruptcy.