Can You File Bankruptcy on Student Loans?

For those who are drowning under the weight of their debts, the answer to the question “can you file bankruptcy on student loans?” is one of great importance. If this sounds like you, it may be valuable to ask our student loan bankruptcy lawyers for their advice on your specific financial situation.

Conditions for Filing Bankruptcy on Student Loans

The conditions for filing bankruptcy on student loans is multifaceted and complex. In general, student loans are categorized as “non-dischargeable.” This means they are not forgiven in a typical bankruptcy situation. However, in specific instances, there may be a way to obtain a complete discharge of your student loan obligations. That said, the situation must truly be dire. To be eligible to have complete student loan forgiveness through bankruptcy, you must demonstrate that the repayment of the loan will cause undue burden.

Many people are struggling with personal debt, making their student loan payments all but impossible.

Understanding Undue Burden of Your Student Loans and the Brunner Test

“Undue burden” is a standard often referred to as the Brunner Test. It was established in the court case of Brunner v. New York State Higher Education Services, Corp., 831 F. 2d 395 (2d Cir. N.Y. 1987). According to the ruling, in order to receive student loan forgiveness, an individual must show three things via overwhelming evidence:

(i) you cannot maintain, based on current income and expenses, a minimal standard of living for yourself and your dependents if you are forced to repay the student loans;

(ii) additional circumstances exist indicating that this financial state of affairs is likely to persist for a significant portion of the repayment period; and

(iii) you have made a good faith effort to repay the student loans.

All three conditions must be proven for the discharge of the student loans to be considered.

If you are looking for a complete student loan discharge, the courts want to determine that you are living responsibly. In other words, you must have eliminated all possible unnecessary and luxury expenses.

While it is not necessary to live in a state of poverty, you must prove “a minimal standard of living.” With regard to this, appropriate and acceptable personal expenses include reasonable housing, utilities, transportation, food, and hygiene, along with moderate recreation. In short, you will need to demonstrate that you have incorporated options to make the debt less burdensome. You must also show that your expenses cannot be further reduced to overcome your inability to pay the debt and maintain a minimal standard of living.

In addition to the inability to currently pay your student loans, the Brunner Test also requires you to provide evidence of additional, exceptional circumstances, ones that would suggest a continuing inability to repay over an extended period of time. (See, e.g., Champagne v. Educ. Credit Mgmt. Corp.(In re: Champagne), 2012 Bankr. LEXIS 321 (Bankr. M.D. Fla. Jan. 12, 2012) (citing Brunner).)

To prove you have exceptional circumstances there must be a “certainty of hopelessness” that you will be able to repay the student loans within the repayment period. “A finding of undue hardship is reserved for the exceptional case and requires the presence of unique or extraordinary circumstances that would render it unlikely that the debtor would ever be able to honor his obligations.” Folsom v. United States Dept. of Educ.(In re Folson), 315 B.R. 161, 165 (Bankr. M.D. Fla. 2004).

Finally, if you are seeking discharge of your student loans, you must show that a good faith effort has been made to repay the debt. According to case law, a good faith effort does not necessarily mean payments must actually have been made. In fact, it could mean that you have diligently sought to obtain employment (if unemployed), maximized your income, and minimized your expenses.

A factor a court must consider when evaluating a good faith effort for student loan forgiveness is whether or not attempts have been made to negotiate with the creditor to establish an affordable payment plan.

For those who are employed, proving undue burden may be possible if your student loan debt is simply unaffordable. Having a job does not automatically disqualify you from the opportunity for forgiveness.

How Hiring a Student Loan Bankruptcy Lawyer Can Help You Now

Clearly, the answer to the question “can you file bankruptcy on student loans” is “yes.” In fact, if you are unable to pay your student loans, declaring bankruptcy and working with a student loan discharge lawyer is an excellent course of action. Professionals with bankruptcy and student loan discharge expertise can be incredibly valuable in helping you manage the complex process necessary to declare bankruptcy and have your loans discharged.

Your student loan bankruptcy lawyer will help you determine which type of bankruptcy is most appropriate in your case (Chapter 7 or Chapter 13) and will work with you throughout the process. Then, he or she will file for an adversary proceeding, the lawsuit which deals specifically with your student loans.

If the student loan creditor does not respond to the lawsuit, then your attorney may be able to obtain what is called a default. If successful, they can then move for a default final judgment holding the student loans are subject to discharge. If the student loan creditor does respond, it is likely that the creditor would rather enter into a settlement than go to trial. Settlements can help ease your financial burden.

Contact Our Student Loan Bankruptcy Lawyer at Adam Law Group Today

Can you file bankruptcy on student loans in Florida? If your student loans are past due, if you have no further payment options and no way out of default, contact Adam Law Group at 904-329-7249 for a free consultation. Ask our experienced student loan bankruptcy lawyers how they can help. Our professionals are well-versed in all aspects of bankruptcy and student loan discharge. We look forward to helping determine what can be done for you.