People across the U.S. are struggling under massive amounts of student loan debt. With aggressive interest rates that rival those of mortgages and credit cards, this seemingly insurmountable pile of debt acquired by seeking an education can only get worse over time. It is no wonder that many people want to know whether bankruptcy will discharge student loan debt. Unfortunately, the answer is that only in very rare instances will bankruptcy discharge student loan debt. Read on to find out more.
Will Bankruptcy Discharge My Student Loan Debt?
The general answer to whether bankruptcy will discharge student loan debt is that, no, it will not be dischargeable in bankruptcy. This is because most student loans are tied to government funding which makes it not dischargeable. If your student loans were funded by a private source, then, yes, they may be dischargeable in bankruptcy. This, however, is pretty rare. Most student loan debtors will not find direct relief from student loan debt through bankruptcy.
There are instances, however few, where a student loan debtor has been granted relief in the form of discharge of a government-funded student loan during bankruptcy proceedings. You may be granted such relief if you can demonstrate that repaying the student loan debt would cause undue financial hardship. To determine whether repayment would cause undue financial hardship, the Brunner Test is often used. Under the Brunner test, student loan debt may be dischargeable if:
- The debtor, if required to repay the student loan debt, would be unable to meet the minimal standard of living.
- The debtor demonstrates that current financial difficulties are likely to span the rest of the repayment period.
- The debtor has made a good faith effort at repaying the outstanding student loan debt.
Not entirely unlike the Brunner Test, the totality of the circumstances test is also commonly applied to these situations. Under the totality of the circumstances test, the court evaluates all relevant factors of the case to determine whether repaying student loan debt would create an undue hardship. Regardless of which test a court applies, however, it must be noted that courts, in general, are very reluctant to discharge student loan debt.
While bankruptcy may not provide direct relief from student loan debt in the way of discharging said debt, it is still a valuable tool that may provide indirect help in tackling your student loan debt. You may even be able to have a portion of your student loan debt discharged in bankruptcy. Otherwise, filing bankruptcy may help provide relief from other debts you face and, therefore, free up your resources to begin paying back your student loans more aggressively.
Miami Valley Bankruptcy Attorneys
If you are struggling with student loan debts, or debt in general, talk to the reliable bankruptcy attorneys at Miami Valley Bankruptcy. We are committed to helping our clients seek much needed relief from countless financial pressures. Contact us today.