Generally speaking, it is not possible for most people to discharge a student loan. Federal rules limiting the discharge of student loans in bankruptcies have grown more and more restrictive over the years. Federal student loans were made non-dischargeable in the 1970s, and in 2005, Congress passed a law exempting private loans from discharge as well. Under the current bankruptcy laws, the only way a debtor can discharge student loans in a Chapter 7 bankruptcy is if he or she can prove “undue hardship,” for which courts employ the “Brunner Test,” named for the case from which it came. The Brunner Test requires that a plaintiff show the following:
- That he or she cannot maintain a minimal standard of living if he or she is forced to repay the loans;
- That other circumstances exist that indicate that the current situation will persist for a significant part of the loan repayment period; and,
- That he or she has made good faith efforts to repay the loans.
This is a notoriously difficult standard to meet and often requires that debtors have medical conditions or other serious issues that will keep them from earning a living and repaying their loans. In order to determine whether you may be eligible for a student loan discharge, you should discuss your case with a Phoenix bankruptcy attorney as soon as possible.
Even in the absence of discharge, bankruptcy may still be able to help
While most student loans will not be able to be discharged through bankruptcy, this fact does not mean that individuals with student loan debt cannot benefit from filing. Chapter 7 bankruptcy is capable of discharging many other types of debt, including the following:
- Credit card bills
- Medical bills
- Certain tax debts
- Personal loans
- Business loans
- Collection accounts
- Federal benefit overpayments
By discharging other types of debts with which you may be struggling, it may free up income and allow you to more aggressively attack or manage your student loans. In some cases, bankruptcy may even be able to help improve a debtor’s credit rating relatively quickly, allowing him or her to more fully participate in the economy.
Contact a Phoenix bankruptcy lawyer today to schedule a free consultation
There are a number of ways that bankruptcy may be able to help you, and anyone experiencing financial difficulty should discuss their situation with an attorney as soon as possible. To schedule a free consultation with Arizona bankruptcy lawyer Ronald J. Ellett at (602) 235-9510.