Student Loans Almost Never Dischargeable in Bankruptcy

Bankruptcy Lawyer Bryan W. Stone answers the question: “Can I get rid of student loans by declaring bankruptcy?”


In the United States, the cost of higher education is ever increasing. If you combine that with the difficulty of obtaining a reasonably salaried job after graduation, it is no surprise that student loan debt plagues graduates long after they graduate. An estimate of student loan debt currently owed in the U.S. is over $1.4 trillion dollars. Individuals with student loan debt may eventually fall prey to financial hardships. If an individual is struggling to pay bills and make ends meet, he or she may consider filing for bankruptcy. Student loan debt is often one of the largest debts a person can try to discharge in bankruptcy. However, it is extremely difficult for student loan debt to be discharged. There are specific and limited circumstances in which student loan debt will be discharged in a bankruptcy proceeding.


Loan-document-Charlotte-Monroe-and-Lake-Norman-Law-Firm-225x300Bankruptcy Law and Student Loans

Until 1998, debtors were able to discharge their student loan debt. However, a change was made in the law so that those with loans were paying back at least a portion of their debt. Now, a debtor is only able to discharge student loan debt if he or she can show an undue hardship. Undue hardship is determined with the Brunner Test. The Brunner Test is a three-prong test that is used to determine if an debtor is demonstrating undue hardship. The three elements to the test are:



  1. A debtor is unable to maintain a minimal standard of living for him or herself and any dependents if forced to pay off the student loans. The minimal standard of living is based of off the debtor’s current income and expenses.
  2. The presence of any other additional circumstances that indicate the debtor will be unable to pay loans for s significant portion of the loan repayment period as determined by the lender.
  3. A court will look at whether or not the debtor has made a “good-faith effort” to repay the loans.


There is no hard and fast definition of what reaches the level of undue hardship. Whether or not student loan debt is dischargeable is entirely dependent on the particular facts and circumstances surrounding a debtor’s discharge. As stated above, it is extremely difficult for student loan debt to be discharged. Nevertheless, there have been instances in which student loan debt has been discharged. The discharge can be the whole amount or a partial amount.


Another avenue potentially available to debtors with student loan debt is if their university did not participate in federal programs. An educational loan is one that is taken out for a school that participates in federal student aid programs. If the debtor’s university did not participate in federal programs, there is a greater chance that those private loans are dischargeable.


If you have questions regarding student loan debt and your potential bankruptcy, you need to consult with a skilled bankruptcy attorney. The experienced attorneys as Arnold & Smith, PLLC will answer all of your questions and help you begin on the path to a better financial future. If you are contemplating bankruptcy in the Charlotte, Lake Norman or Monroe area, please call the skilled lawyers at Arnold & Smith, PLLC at 704-370-2828 or find additional resources here.





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