Student Loan Discharges - Bankruptcy
You have probably heard that student loans are difficult, if not impossible, to discharge in bankruptcy. While it is difficult to discharge student loans in bankruptcy, it is certainly not impossible. In order to discharge a student loan in bankruptcy, the borrower must show that the payment of the student loan – whether a federal or private student loan – will result in an undue hardship on the borrower and the borrower’s dependents. Courts around the country use different tests to evaluate whether a particular borrower has shown an “undue hardship”.
The most common test is the “Brunner Test”, which requires a showing that: (a) the borrower cannot maintain, based on current income and expenses, a “minimal” standard of living for the borrower and the borrower’s dependents if forced to repay the student loans; (b) additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period of the student loans; and (c) the borrower has made good faith efforts to repay the loans. This is based on a 1987 Circuit Court decision. This the test that is commonly used by United States Bankruptcy Courts in Florida.
However, much has changed since 1987, and some courts have begun to question whether a more relaxed and realistic standard should be used. If an undue hardship can be proven, your student loans will be discharged.
Even without a discharge, bankruptcy can help many student loan borrowers. The bankruptcy automatic stay, which can last anywhere from a few months to five years, depending on the type of bankruptcy filed, can be a huge benefit for borrowers who are drowning in student loan debt. It is very important to seek advice from a bankruptcy and student loan attorney who understands the various tests employed by the courts, and who can best advise you regarding your options.
The attorneys at Leiderman Shelomith Alexander + Somodevilla, PLLC can help. Call us today at (954) 920-5355 for a no cost consultation to discuss whether your student loans may be dischargeable in bankruptcy.