Can I Discharge Student Loans by Filing for Bankruptcy?

If you file for Chapter 7 or Chapter 13 bankruptcy, which are the common chapters people file for, you probably will not be able to discharge your student loans. There is still hope, however, if you can prove that you would be caused undue hardship by repaying the student loans you owe.

Courts will test whether you indeed would be caused undue hardship by paying off your student loan debt and methods vary. Most of the time, the test either determines that you are qualified or that you are not. Some courts may discharge a portion of your debt. Courts are generally hesitant to discharge debt, but if you have low income, or your school was a for-profit institution, then you have a much better chance of discharging your debt through bankruptcy.

Using the Brunner Test to Determine Eligibility

The Brunner Test uses three criteria to determine if you qualify for discharging loans through bankruptcy. If you meet all three, you will qualify.

  1. You live in poverty. Your current expenses and income do not support a minimal standard of living for you and any dependents you may have and paying loans will worsen your financial situation.
  2. Your dire financial situation will persist for a long while, even through a repayment period.
  3. You have made efforts in good faith to repay the loans but are still having trouble.

There may be other tests the court will implement to determine your eligibility. The Brunner Test is the most common.

What to Do to Discharge Through Bankruptcy

In order to proceed with filing for bankruptcy, you will have to file an adversary proceeding which will help the court determine if your loans qualify for discharge. Then you will have to present evidence of undue hardship should you be forced to repay your loans. It is helpful to have and likely that you will need the testimony of an expert witness in your case to bolster your case.

If you attended a vocational, or trade school, then you may have a stronger case since those schools are supposed to prepare you to go directly into a job field. For example, you may claim a breach of contract, fraud or deceptive business practices. If you do succeed in proving one of those factors, you may not need to discharge, you may just not have to pay the money.  

Calling a Bankruptcy Attorney

Consider consulting a bankruptcy lawyer Bloomington, IL residents trust about the particular laws in your state regarding student loans and bankruptcy. Especially consider if your state follows the Brunner Test or other methods to determine your eligibility. If the court you visit has ruled on a similar case, knowing their ruling may help you build your case. If you have serious debt, then you may wish to pursue bankruptcy in order to discharge the debt, this means you will need the assistance of an experienced bankruptcy attorney.

Thank you to our contributors at the law office of Pioletti & Pioletti for the above information.