With the rising cost of education comes the increasing number of people with student loan debt. It is not uncommon with graduates to have hundreds of thousands of dollars in student loans to repay. Student loans can be a lifelong financial burden. People often come to find out that their expenses are higher and their income is lower after taxes. These factors can make student loan debt repayment difficult if not impossible.
Bankruptcy is a great way to make a fresh start, but not all debt is treated equally. For instance, student loan debt is not the same as credit card debt. Student loans are not dischargeable pursuant to Bankruptcy Code section 523(a)(8) except in one narrow circumstance. People must show that the student loans are creating undue hardship, which can be extremely difficult to prove.
Bankruptcy judges use what is known as the Brunner test when determining whether they should discharge someone’s student loan debt. The Brunner test used the following three elements to determine whether someone is required to repay his student loans:
- First, can you maintain, based on current income and expenses, a minimal standard of living for yourself and your dependents if forced to repay the loans;
- Second, that additional circumstances existed that indicate that your current state of affairs was likely to persist for a significant portion of the balance of the loan period; and
- Third, that you have made a good faith effort to repay the loans.
It is very difficult to meet all elements of the Brunner test. There is life after bankruptcy. Contact me today to find out how I can help you get a fresh start.