What Is Undue Hardship – And How Does It Affect Student Loan Discharge in Bankruptcy? Skip to main content

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What Is Undue Hardship – And How Does It Affect Student Loan Discharge in Bankruptcy?


Undue hardship - student loans

Can you prove undue hardship and shed your student loans?

Image by Jessica45 at Pixabay

Many people wrongly believe that student loans are not dischargeable in bankruptcy. In fact, they are, but you must meet certain circumstances to earn the discharge. Private student loans are easier to dismiss in bankruptcy while federal loans present more of a challenge. The primary barrier to student loan debt relief in bankruptcy is that so few people seek it.

If you don’t ask for discharge, you’ll never get it. A study by Pew Research reported that only around 0.1% of bankruptcy filers with student loans even try for the discharge of this critical debt. Of those who take the extra step to request relief, 40% obtained a full or partial discharge. That’s nothing to disregard. Your circumstances might be a fit for bankruptcy debt relief. The key is undue hardship.

Undue Hardship

Chapter 7 is a popular choice for bankruptcy filers mostly because it provides sweeping debt relief in record time. It takes a few months from start to finish, but student loans aren’t automatically part of the process. Federal student loans are exempted from standard bankruptcy proceedings, and you must take an extra step to seek discharge.

You first must file an adversary proceeding against your student lender. Part of the discharge process is proving “undue hardship” which is the standard set by federal law for unloading student loan debt in bankruptcy. The law sets the standard but doesn’t define it. That’s been left up to the courts to interpret, and results have varied widely.

The courts have developed certain factors that will be considered, however. The most popular of these is the Brunner Test under which you would be required to prove the following:

That repaying the debt would leave you with no reasonable standard of living

To prove this factor, you must demonstrate that your monthly income is insufficient to support you and your family while keeping up with student loan payments. Stating that your conditions qualify as undue hardship isn’t enough. You must document your finances in detail and prove that you would be left with an unreasonably low standard of living should you not get the student loan relief you seek.

That your hardship is unlikely to end anytime soon

Whatever caused your unfortunate circumstance must continue for the foreseeable future to meet the undue hardship standard of the Brunner Test. If you have a short-term financial hiccup, that’s likely not enough. Chronic illness, permanent disability, and long-ranging unemployment may qualify you to meet this prong of the test. If it should last most of the repayment term, that may suffice.

That you have tried to repay the debt

The bankruptcy court expects that you tried to repay and intended to honor it when you signed for the debt. The courts don’t like seeing people take on debt when they didn’t mean to pay it back because that’s tantamount to fraud. They also like to see some effort on your behalf, even if you failed, before they grant debt relief.

Seeking Bankruptcy Relief for Student Loans

It’s okay if you don’t know if your circumstances qualify for undue hardship. That’s a conversation to have with a reputable North Carolina bankruptcy lawyer with experience in student loan debt relief. The first consultation should always be free, and they can look at your income, debt, living expenses, and student loans and advise you on what’s possible and how they can help.

For some student loan borrowers, an income-driven repayment plan may be enough to set their finances to right. But for others, bankruptcy may be the only way to restore some quality of life, particularly if your financial circumstances are dire. Don’t wallow in unmanageable debt – find out your options for a better future with less debt, less stress, and more hope.

To find out more, contact the Law Offices of John T. Orcutt. Read reviews from our clients, then call +1-888-234-4190 to schedule a free North Carolina bankruptcy consultation at one of our convenient locations in Raleigh, Durham, Fayetteville, Wilson, Greensboro, Garner or Wilmington.



Pew Study

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