How Does Bankruptcy Affect My Student Loan Debt?

As the cost of higher education has skyrocketed, more and more Americans are finding it difficult to meet the ever-increasing costs of getting an undergraduate or advanced degree.

U.S. News reported last year that among schools ranked in its National Universities category, tuition and fees for the 2020-2021 school year amounted to an average of $41,411 for private colleges, $26,809 for out-of-state students at state schools, and $11,171 for residents at a public university in their state.

Again, these figures represent what an individual had to afford for a single year. This means the total cost of their education could be greater than four times these annual amounts when tuition and fee hikes across a four-year undergraduate program are considered.

It’s no wonder why so many students have turned to student loans to help them afford their education, and it’s also no wonder why some are hopeful that bankruptcy can relieve them of impossible financial burdens.

How to Discharge Student Debt with Bankruptcy

If you’re wondering whether or not bankruptcy can help you get out of your student loan debt, understand that generally it is not possible to discharge student loans in a bankruptcy. Unfortunately, under current law, the prospect of discharging your student loan debt is very remote.

As a result of a 1987 ruling, a federal court established what is known today as the “Brunner Test,” so-named for a student loan borrower who sought to discharge her student loan debt in bankruptcy. The Brunner Test is used by the court to assess the level of hardship that student loan obligations place upon an individual.

When the borrower meets the following three criteria, they have passed the Brunner Test:

  • The borrower can’t maintain a basic standard of living if he or she is required to pay back student loans.
  • The borrower can prove that the hardship will endure for a substantial portion of the loan repayment period.
  • The borrower has demonstrated an earnest attempt to pay back student loan debt before turning to bankruptcy

It’s important to note here that most, although not all, federal courts will use the Brunner test to evaluate whether the borrower is suffering undue hardship from his or her student loans. Some courts, specifically the 1st U.S. Circuit Court of Appeals and the 8th U.S. Circuit Court of Appeals use a standard referred to as the “totality of circumstances.” With this standard, judges take into account someone’s living expenses, as well as their past, present, and future finances, when reviewing their bankruptcy appeal.

Conclusion

While it is generally not possible to discharge student debt through bankruptcy, there are extreme circumstances in which courts have determined that a debtor’s student loan debt should be discharged. . This doesn’t mean affording student loan payments is a mere inconvenience – often, it means that one’s student loans make it impossible to afford rent, food, utility bills, and other basic aspects of life.

An experienced attorney can help you prove your case if you are trying to relieve the financial burden caused by your student loan debt. At the Law Offices of Mark A. Bandy, PC, we can help you build a case that demonstrates your student loan debt is holding you back from maintaining a basic standard of living. In successful cases, this can mean having your student debt discharged through bankruptcy.

Take advantage of a free consultation with our attorney to learn more. Request yours today when you contact us online or call (912) 331-4501 today.

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