Can I discharge my student loans in bankruptcy?

 

Can I discharge my student loans in bankruptcy?

Answer: The short answer is probably not. Historically, it has been very difficult (read: nearly impossible) to get your student loans discharged in bankruptcy. In rare circumstances, you can discharge student loans in bankruptcy.

So like what Are the Chances?

Among bankruptcy filers who ask the courts to discharge their student loans, about 40% received some sort of remedy, either full or partial discharge. The courts granted 25% of the filers a complete discharge of all student loan debt. The takeaway here is that it is worth the effort to at least request student loans be discharged in bankruptcy, because even if the courts say “no” in most cases, they say “yes” in some.

Passing the Brunner Test

Most bankruptcy courts use the three-part Brunner test to determine whether bankruptcy filers qualify for a discharge of student loan debt. The test is named after Marie Brunner, a bankruptcy filer in the state of New York, who in the 1980s attempted to have her student loan debt discharged. The case, ultimately unsuccessful, established the three-part test. Filers must prove that repaying the loans would cause them to live in poverty. They must show their financial situation is not likely to change. They must also show they made a good-faith effort to repay the loans.

So What About Student Loan Debt Forgiveness?

If you have high student loan debt you may want to explore forgiveness and repayment assistance programs to manage the debt. For example, people who pursue careers in public service, such as teaching, medicine and law, and meet certain criteria may be eligible for partial or full-loan forgiveness. The U.S. Department of Education and state departments of education post information regarding student loan forgiveness on their websites.