Student loans are notoriously difficult to discharge in bankruptcy, but it is not impossible. Federal law allows for the discharge of student loans if the borrower can prove “undue hardship.”
Courts consider factors such as income, living expenses, and the borrower’s ability to maintain a minimal standard of living while repaying the loans. Because the threshold is high, very few cases qualify. Nevertheless, for those struggling with extreme financial difficulty, bankruptcy may provide a potential path to reduce or eliminate student loan obligations.
What Steps Are Involved in Proving Undue Hardship?
To seek a student loan discharge, borrowers usually file an adversary proceeding within their bankruptcy case. This is a separate legal process in which the court evaluates whether repayment would cause severe and long-lasting financial hardship. Documentation of income, expenses, employment history, and attempts to repay loans under income-driven programs is critical.
Many courts use the Brunner test, which requires proving that the borrower cannot maintain a minimal standard of living, that hardship is likely to persist, and that the borrower has made good-faith efforts to repay the loans. Working with a bankruptcy attorney experienced in student loans is essential to navigate this process successfully.
Alternative Strategies When Full Discharge Isn’t Possible
Even if a full discharge is unlikely, bankruptcy can provide relief in other ways. Some borrowers use income-driven repayment plans, consolidation, or negotiation with lenders to manage payments. In certain cases, partial discharge may be possible if loans are private or tied to specific circumstances.
Planning ahead, documenting finances, and exploring all options ensures borrowers take advantage of protections available under bankruptcy law while minimizing long-term financial strain.
While student loan discharge in bankruptcy is rare, understanding the process and requirements allows borrowers to explore their options. With proper guidance, it is possible to determine eligibility, protect essential finances, and pursue strategies that make repayment more manageable.
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