Understanding the Dischargeability of Student Loans in Bankruptcy

When signing up for a college education, far too many students don’t give their educational loans a second thought. After they graduate with an average of $35,000 in student loan debt per person (as of 2015), however, it starts to become a major problem. It is currently estimated that more than 11% of all student loans are in delinquency, and that number continues to rise.

Many people who are struggling with student loan debt believe that declaring bankruptcy might be a good solution. The fact is, however, that student loan debt is not like other types of debt. It is commonly referred to as “unbankruptable” because in the vast majority of cases, the money you owe in student loans will not be eliminated through the bankruptcy process. Whether you seek Chapter 7 or Chapter 13 bankruptcy, the chances are you’ll still have your student loans waiting on the other side.

While it is difficult to have student loan debt included in your bankruptcy hearings, it is not impossible. There are two methods available for determining whether or not a court will include these loans in the process. They are called the Brunner Test and the Totality of Circumstances Test.

The Brunner Test

When using the Brunner Test, the courts demand that you show that if the student loans remain active after your bankruptcy, they would make it unreasonably difficult for you to support yourself and your family, even at a minimal level. In addition, you must be able to show that this is likely to be the case long into the future. If the courts accept the evidence you provide, you can have your student loans discharged.

The Totality of Circumstances Test

This is a less precise but typically equally difficult option to qualify for. This test makes it so the courts can look at all the factors influencing your finances and make an objective decision regarding how reasonable it is that you will be able to repay your loans in the future. If payments on your loans will create an “unreasonable” burden, they may be able to be discharged.

Seek Skilled Representation

It is extremely important to understand that both of these tests are quite hard to prove in court, and most people are unable to get their student loans discharged. If you believe you may qualify for one of these options, however, a good attorney can dramatically improve your odds of having your student loans eliminated. Here at the Law Office of Ray Garcia, we will fight on your behalf to help get you in the best possible financial position going forward. If you are considering bankruptcy, please give us a call to learn more or to set up a consultation with a skilled bankruptcy attorney.