Student loan debt is now the second-highest category of consumer debt with borrowers owing $1.5 trillion in loans. For many college graduates beginning their careers at entry-level salaries, paying student loans can make it very difficult to save money for a down payment on a home or pay living expenses without assistance from parents or without working a second job. Individuals often contact our South Atlanta bankruptcy lawyer to discuss discharging student loans in bankruptcy.
Unfortunately, student loans are typically not eligible for a discharge in bankruptcy unless the debtor meets strict requirements for a hardship discharge. Therefore, even if someone files for bankruptcy relief, that person will likely continue paying student loan debt for many years. However, the requirements for a hardship discharge may be relaxed in the future.
Changing the Standard for Undue Hardship Discharges
The Education Department announced in February 2018 that it would be exploring the standard of determining whether a debtor meets the “undue hardship” requirement for student loan forgiveness. Currently, the standard for an undue hardship discharge of student loans is very high. By adjusting the standard, it may make it possible for more debtors to obtain a student loan discharge in bankruptcy.
Discharging Student Loans In Bankruptcy
Our Georgia bankruptcy attorney reviews student loans when a debtor files bankruptcy to determine if the student loan may be discharged. Until the law changes, a debtor must meet three specific requirements for a hardship discharge of student loans in bankruptcy. The elements are referred to as the Brunner Test based on the decision in the court case of Brunner v. New York State Higher Educ. Servs. Corp.
According to Brunner, the bankruptcy court reviews three factors to determine if the debtor meets the undue hardship requirements. The three-prong test examines:
- Minimal Standard of Living — If the debtor is required to pay the student loan payments, will the debtor have the ability to maintain a minimal standard of living? A minimal standard of living includes basic necessities, which usually does not include optional expenses such as cable television, expensive cell phone plans, high car payments, etc.
- Persistent Circumstances — Do circumstances exist that indicate the debtor’s current financial situation is expected to continue for the term of the student loan or a substantial portion of the term? Being unemployed or having a short-term disability at the time of the bankruptcy filing is usually not sufficient to satisfy this requirement. You must show that you have a permanent disability, or you must acquire substantial training to obtain new employment to satisfy this requirement.
- Good Faith Effort — The court requires the debtor to have a history of a good faith effort to repay the student loan. In most cases, this element is satisfied if the debtor can show that he has a history of paying the loan payments until circumstances made payments impossible. In addition, the court inquires whether the debtor attempted to modify the loan, seek a forbearance, or made other sacrifices in an attempt to fulfill the terms of the student loan.
The interpretation of the Brunner requirements is very subjective and can vary depending on the bankruptcy judge. You need an experienced Georgia bankruptcy attorney to assist you with preparing and filing the documents requesting a hardship discharge of your student loans.
Call a Georgia Bankruptcy Attorney for More Information
Even if your student loan is not eligible for discharge, our Georgia bankruptcy attorney can help you file for bankruptcy relief to eliminate other debts. By getting rid of other debts, your student loan payments may be more affordable. Learn more by contacting a skilled Georgia bankruptcy attorney today.
Want More Information on Student Loans by School by State?
For a comprehensive analysis of student loan debt statistics check out this 2020 wiki article. Before applying for a college loan read this eye-opening article! Did you know the average cost of a college education has almost tripled over the last 30 years? Given the overall cost of a college education and the current difficulty of getting rid of student loan debt through bankruptcy, students may want to consider cost-saving alternatives. For example, local colleges are usually less expensive and may provide the option of living at home to reduce costs. Work/study programs may also help offset college expenses. Certainly, many students want to experience the “college life” (whatever that means to each student). But that decision may come with a price that students have to carry financially for a long time after college ends.