Are Student Loans Currently Dischargeable in Bankruptcy?

Under the current state of the law, discharging student loans in bankruptcy is incredibly difficult but not impossible. In the United States, student loans are typically not eligible for discharge in bankruptcy unless the debtor can establish "undue hardship."

In interpreting whether a debtor's student loans pose an undue hardship on the debtor, bankruptcy courts apply either the "Brunner Test "(Brunner v. New York State Higher Education Services, 831 F.2d 395 (2d Cir. 1987)) or the "totality of the circumstances" test.

Under the totality of the circumstances test, a bankruptcy court considers the following: the debtor's past, present, and reasonably estimated future financial resources; the debtor's—and any dependent's—reasonably necessary living expenses; and other relevant facts or circumstances that are unique to the case that might could hinder the debtor's ability to repay the student loans in question while still allowing the debtor to maintain a basic standard of living, even when aided by a discharge of other prepetition debts.

To prove undue hardship, the debtor must file an adversary proceeding in bankruptcy court and show that:

1. They cannot maintain a minimal standard of living if they are forced to repay the loans;
2. The undue hardship will persist for a significant portion of the repayment period; and
3. They have made good-faith efforts to repay the loans.

The first requirement, the inability to maintain a minimal standard of living, means that the debtor must show that they cannot afford to pay both their student loan debt and their basic living expenses. This includes things like housing, food, and healthcare.

The second requirement, the persistence of undue hardship, means that the debtor must show that their financial situation is unlikely to improve in the foreseeable future. This means that the debtor's current financial hardship must be expected to last for a significant portion of the repayment period for their loans.

Finally, the debtor must show that they have made sincere and genuine efforts to repay their loans. This means they must have made reasonable efforts to pay their loans, such as exploring repayment options or negotiating with the lender.

This is a high standard to meet, and very few bankruptcy filers are successful in discharging student loans through bankruptcy. However, it is worth noting that recent legislative proposals have called for changes to bankruptcy laws to make it easier for borrowers to discharge student loan debt.

Contact Fleysher Law To Schedule an Initial Consultation With Our Bankruptcy Attorney.

Navigating the complex process of discharging student loans in bankruptcy requires the expertise of experienced attorneys who understand the intricate nuances of the law. At Fleysher Law, we stand ready to help you pursue the possibility of discharging student loans despite the challenges. Here's how we can assist you:

1. Thorough Case Evaluation: Our skilled attorneys will comprehensively assess your financial situation and student loan debt to determine the feasibility of establishing "undue hardship."
2. Adversary Proceeding Representation: We will guide you through the adversary proceeding in bankruptcy court, building a strong case to demonstrate the three key requirements for proving "undue hardship."
3. Evidence Compilation: Our team will work closely with you to gather the necessary evidence, showcasing your inability to uphold a basic standard of living, the persistence of undue hardship, and your sincere efforts to repay the loans.
4. Legal Strategy Development: Based on the unique circumstances of your case, we will craft a strategic legal approach to maximize the chances of successfully discharging your student loans.
5. Legislative Advocacy: While discharging student loans in bankruptcy remains challenging, we stay informed about legislative proposals and changes that could benefit borrowers, advocating for your rights and interests.

Although discharging student loans in bankruptcy is complex and success is not guaranteed, our dedicated attorneys are committed to providing you with the best possible legal representation. If you are facing student loan debt and considering bankruptcy, contact Fleysher Law today for a confidential consultation.

Let us be your trusted partner in pursuing financial relief and exploring all available options to achieve a brighter financial future.