Can I Discharge My Student Loans in Bankruptcy?

If you are considering filing for Chapter 7 bankruptcy in Oklahoma City and have substantial student loan debt, you might be wondering whether this type of debt can be discharged. Generally speaking, it is very difficult to discharge most student loan debt in bankruptcy. At the same time, it is not impossible to do. Many debtors have heard that it is impossible to get rid of student loan debt through liquidation bankruptcy, and this is not always the case.

There are a couple of different tests that courts can use in order to allow for a discharge of student loan debt in a bankruptcy proceeding, and we will discuss those in more detail with you.

Requirement of “Undue Hardship” Under the Bankruptcy Code

Under the U.S. Bankruptcy Code, student loan debt generally cannot be discharged through bankruptcy unless the court’s failure to discharge that debt would “impose an undue hardship on the debtor.”

Student loans are described under this federal law as educational benefits and educational loans. What is an “undue hardship,” though? The statute does not clarify this. There is case law that helps to clarify what an “undue hardship” constitutes.

Understanding How the Brunner Test Works

In the Brunner case, the court interpreted the term “undue hardship” and developed what is known as the “Brunner Test.” If a debtor can pass the Brunner Test, then she is said to have an undue hardship. There are three elements of the Brunner Test, and a debtor must have all three elements:

  1. Debtor cannot maintain a “minimal” standard of living for herself and her dependents if she is forced to repay the loans;
  2. Debtor’s current financial situation is likely to persist for much for the repayment period; and
  3. Debtor has made a good-faith effort to repay the loans.

There are other tests that courts can use as well, such as the “Totality of the Circumstances” test, in which the court weighs a wide variety of factors. The Brunner Test is the most common in bankruptcy cases where the debtor seeks a discharge of student loan debt.

Contact an Oklahoma City Bankruptcy Attorney

Do you have questions about filing for Chapter 7 bankruptcy? Are you interested in learning more about the options for discharging student loan debt through consumer bankruptcy? An experienced bankruptcy attorney in Oklahoma City can assist with your case. Contact Deborah Brooks & Associates, P.C. to learn more about the services we provide.