A common misconception is that student loans can never be discharged with bankruptcy. While it is certainly difficult to have these debts discharged, it is not impossible in all cases.
The experienced Cincinnati bankruptcy attorneys at O’Connor, Acciani & Levy can help you determine if bankruptcy is the right option for your student debt. We are committed to helping our clients achieve the new financial beginning they need to restart their lives.
Contact us to set up a free, no obligation consultation to determine the legal options available to you.
The Brunner Test And Undue Hardship
To discharge student loans in bankruptcy, you must be able to show that having to pay the student loans would serve as an undue hardship on you. Congress does not have a specific definition of an undue hardship, which is why courts may use different tests to determine when something constitutes an undue hardship. Some courts have allowed discharge in situations in which loans for fraudulent schools were procured or when a former student has a debilitating medical condition.
The most common test to determine undue hardship is the Brunner test. To pass the Brunner test for undue hardship, you must be able to show that being required to pay off the loans will result in you not being able to continue at a minimal standard of living. Some courts have stated that a minimal standard of living falls somewhere between the poverty level and mere difficulty.
You must also be able to show that circumstances are such that you would suffer this diminished standard of living for a good part of the loan repayment period.
Finally, you must be able to demonstrate that you have made good faith attempts to meet your obligation to the debt. Good faith efforts may include changing your repayment plan or contacting your student loan servicer to discuss alternative options.
If you can establish all of the elements above, your student loan may be canceled. However, the bankruptcy court has the discretion to make other decisions. For example, it may decide to discharge a portion of the loan and require you to pay the remaining balance. It may decide that you can repay the loan but may provide for different terms, such as a longer repayment period or a lower interest rate.
How To Discharge Student Debt
Student debt may be part of your Chapter 7 or Chapter 13 bankruptcy filing. However, discharging your student debt is not an automatic process in a bankruptcy filing. This type of debt is initially exempt from discharge. To have student loan debt discharged, you must affirmatively request the bankruptcy court discharge it by filing an adversary proceeding petition that requests the court find that repaying your student loans would cause an undue hardship. Your student loan account holder may be present at this request and can challenge it.
If you previously filed for bankruptcy without claiming undue hardship, you may still be able to reopen your bankruptcy case for the purpose of determining undue hardship.
Other Options If You Cannot Discharge Your Debt
If your student loan is not considered an undue hardship and cannot be discharged through a Chapter 7 or Chapter 13 bankruptcy, you may have other options.
For example, you may be able to use another payment plan that offers more affordable payment options. You may qualify for deferment or forbearance. You may be able to restructure your payment plan to make it more manageable.
Contact A Bankruptcy Lawyer In Cincinnati Today
If you would like to discuss your options for filing bankruptcy, contact the skilled bankruptcy attorneys at O’Connor, Acciani & Levy. We can gather information about your student loans and determine whether discharge may be a possibility based on your individual circumstances. We can discuss the advantages and disadvantages of the options available to you.
We offer a free consultation so that you can find out about our services and your options without having to pay for this important information.