If you are considering bankruptcy, it is likely that you have multiple debts, possibly including student loans. You may have heard that student loans can never be discharged through bankruptcy, but this is not always true. Under the right circumstances you may be able to have your student loans discharged through bankruptcy.
Student loans and undue hardship
The lynchpin in having student loans discharged through bankruptcy is proving that if you are required to pay back your student loans you and your dependents will suffer an undue hardship. This is referred to as the Brunner test.
There are three prongs to the Brunner test that you must prove to have your student loans discharged through bankruptcy. The first is that repaying your student loans will stop you from keeping a “minimal” standard of living, given your specific income and routine expenses.
Under the second prong of the Brunner test, you must be able to prove that your financial situation will not change during the remainder of the loan’s repayment period.
Under the third prong of the Brunner test, you must be able to prove that you made a “good faith” effort to pay back your student loans.
To discharge your student loans through bankruptcy you will have to file an adversary proceeding in addition to your Chapter 7 bankruptcy filing. In the adversary proceeding, you will argue why you satisfy the elements of the Brunner test.
Meeting the elements of the Brunner test can be difficult, but it is not impossible. Student loan debt can be absolutely crushing. Having your student loans discharged through bankruptcy can prove to be the financial lifeline you need to move forward on a clean financial slate.