Law Office of Rick Morin, PC

For the 40 million Americans who currently have student loans, many assume that student debt cannot be discharged through bankruptcy. However, this is simply not true.

Receiving a student loan bankruptcy discharge can be difficult. However, in some cases student loan debt can be discharged during a Chapter 7 or a Chapter 13 bankruptcy.

First, the debtor must file an adversary proceeding, which is a separate lawsuit within their bankruptcy. During this proceeding, the court will decide if the debtor faces an “undue hardship” in repaying their student loans. Bankruptcy courts have been very strict in determining if debtors meet this qualification. Typically, the Brunner Test, or a similar evaluation, will be used. It states that a debtor faces “undue hardship” when they answer, “yes” to these 3 questions:

1. Is it impossible for the debtor to maintain a “minimal” standard of living?

2. Will the debtor be stuck in this situation for the foreseeable future?

3. Has the debtor actually attempted to repay their loans?

Debtors rarely meet all of these criteria and the court proceeding alone can be intimidating enough. To the majority of filers, the process seems impossible.

Yet, these are the main factors that promote the student loan myth. According to a 2011 study cited in US News & World Report and published by Jason Iuliano, of all the debtors with student loans, only 0.1% attempted to include their student loan debt in their bankruptcies. Of that tiny percentage, at least 40% got some or all of their student debt discharged. This shows that while discharging student loan debt may be difficult to do through bankruptcy, it is not impossible.

If you are struggling with your student loan debt or have questions bankruptcy, please call our office at (916) 333-2222.