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Student loans may be dischargeable, but you have to at least try

Charlotte Bankruptcy Lawyer Bryan W. Stone of Arnold & Smith, PLLC answers the question “Can I get rid of student loans by declaring bankruptcy?”


So often in life we limit what we can achieve by self-limiting the possibilities of what we might achieve. The same may be true in a bankruptcy. If a person limits the range of debts one seeks to discharge in a bankruptcy, one may sell oneself short.

Net Cost FY 2006 Charlotte Student Loan Lawyer North Carolina Student Debt AttorneyThe blame isn’t entirely on the individual. Society plays its part. We are told the rules, told what to expect and told what is expected of us. But what happens if what we are told is wrong? So often in bankruptcy—as in life—we should live by the rule of “Buyer Beware.” We should educate ourselves on our options and choose for ourselves the best course in light of our circumstances.

No one is buying anything in bankruptcy, unless purchasing the discharge of debts and, potentially, a new lease on life, is seen as something for which one is willing to pay. No one says going through bankruptcy is easy, but there is an end to it, and whatever leads people into bankruptcy may be worse.

One common elephant in the bankruptcy room is student-loan debt. It weighs heavy because most people believe it is not dischargeable in bankruptcy. Perhaps that is why just .1 percent of consumers with student loans try to seek their discharge through bankruptcy proceedings. This may be a case in which the 99.9 percent are truly to blame.

A story this week in U.S. News and World Report shows that “at least 40 percent of borrowers who do include their student loans in their bankruptcy filing end up with some or all of their student debt discharged.” In other words, most people who go through bankruptcy don’t get their student loans discharged, but that is because most people don’t even try.

The Bankruptcy Code exempts student loans from discharge in bankruptcy unless requiring their repayment would cause “undue hardship.” The code does not define “undue hardship,” so when debtors in bankruptcy seek to discharge student loans, bankruptcy courts apply a three-step analysis called the “Brunner test” to see if discharge is appropriate.

First, in order to pass the “Brunner test,” a debtor’s financial situation must be unlikely to change in the future. In addition, the debtor must show that requiring him or her to continue repaying student loans will cause him or her “to be unable to sustain a minimum standard of living.” Finally, the debtor must show that he or she has made a good-faith effort to repay his or her loans.

In addition, some debtors have successfully argued that their private student loans were not used to attend schools that were eligible for federal student-aid programs. The exemption from discharge, they have argued, therefore did not apply.

The bottom line is that if you are considering bankruptcy, you should consider all of your options, including whether your student loans may be dischargeable. You never know, if you pass the Brunner test, they just might be!

If you find yourself needing the services of a Charlotte, North Carolina bankruptcy attorney, please call the skilled lawyers at Arnold & Smith, PLLC find additional resources here. As professionals who are experienced at handling all kinds of bankruptcy matters, our attorneys will provide you with the best advice for your particular situation.



About the Author

Bryan 1Bryan Stone is a Partner with Arnold & Smith, PLLC, where he focuses his practice on all aspects of bankruptcy, including: Chapter 7, Chapter 11, Chapter 13, home loan modifications and landlord-tenant issues.

A native of Macon, Georgia, Mr. Stone attended the University of Georgia, where he earned a BBA in Banking and Finance, and Wake Forest University School of Law, where he obtained his law degree.

Following law school, Mr. Stone relocated to Charlotte, where he currently serves as Chair of “Bravo!” – a young professionals organization associated with Opera Carolina – and founded the University of Georgia Alumni Association of Charlotte.

In his spare time, Mr. Stone enjoys perfecting his barbeque skills for the annual “Q-City BBQ Championship” and playing softball in the Mecklenburg County Bar softball league.







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