There’s no doubt that student debt is a huge financial burden. Many of us are even stuck paying it over the course of two decades. But what happens when you file for bankruptcy? Can your student loans be discharged too?
For most people who file for Chapter 7 or Chapter 13 bankruptcy, it is hard to wipe out their student loan debt too. However, there is an exception. If you can prove that your student loans would cause an undue hardship on you, you may be able to get rid of them in bankruptcy.
The test for determining whether your student loans create undue hardship can vary from court to court. Some look at the undue hardship test as all or nothing, while other courts will discharge part of the debtor’s student loan.
The Brunner Test
Some courts use the Brunner test for determining whether or not your student loan should be discharged. Under this test you must meet the following three factors:
- Poverty – You are unable to maintain a minimal standard of living for yourself and your dependents if you have to repay the loan.
- Persistence – Your financial situation is likely to continue for a large part of your repayment period.
- Good Faith – You have tried in good faith to repay your student debt.
The Totality of the Circumstances Test
Some courts use the totality of the circumstances test, which looks at all relevant factors of your case to determine if repayment of your loan would create an undue hardship.
While other tests are used, it is best to determine which test is used in your jurisdiction. You can do so by speaking with a local qualified bankruptcy attorney. To try to discharge your student loan in bankruptcy you must file an adversary proceeding with the bankruptcy court and present evidence to demonstrate that payment of your loans would, in fact, cause undue hardship.
An Experienced Bankruptcy Attorney Can Help
If you are considering filing for bankruptcy, the experienced and compassionate Arkansas Bankruptcy Attorneys at Caddell Reynolds can help you to figure out your best options and move forward.
We examine the facts of your case individually and will walk you through each step of the legal process. Call Caddell Reynolds today at 866-853-6020 for a FREE Legal Consultation.