In addition to a degree, millions of Americans leave college with an overwhelming amount of student debt. The current average amount of this debt is over $29,000.
When combined with mortgage and car payments, student loans can stretch monthly income to its breaking point, and when an unexpected expense comes along, families may find themselves unable to keep up.
Undue hardship
A common misconception is that bankruptcy will not eliminate student loan debt. That’s not true, but the process is more complicated.
To discharge student loan debt through bankruptcy, the borrower must demonstrate “undue hardship.” The Brunner test is the most commonly used standard. The individual must be able to prove the following three elements:
1. Poverty: The debtor cannot maintain a minimal standard of living for themselves and their dependents if forced to repay the loans.
2. Persistence: The financial situation will likely persist for a significant portion of the repayment period.
3. Good Faith: The debtor has made a good faith effort to repay the loans.
The court has set a high bar for proving hardship, making it daunting for anyone trying to discharge student debt. It often requires substantial documentation and expert testimony.
However, there have been some cases where student loans were successfully discharged. Issues such as persistent health issues, limited job prospects and inability to secure steady employment met the undue hardship standard.
To prove undue hardship, it’s crucial to keep detailed records of income, expenses, medical conditions and efforts made to repay the loans. It’s also important to discuss your situation with someone who can assess the likelihood of success of having your student loans discharged and provide valuable guidance on your best options.
