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Bankruptcy can discharge student loans, but it won't be easy

Times are hard, and your paycheck seems to stretch thinner each week. Your mortgage, medical bills and credit card debt would be burden enough, but the student loans overwhelm you. Perhaps they are from your own education, but more than likely, you took them on for your children or grandchildren.

While you certainly don't regret this decision or the opportunity you were able to provide for their education, it almost feels as if you are being punished for it. The late fees and interest have accumulated, and you've heard that the massive debt of student loans can't be discharged through bankruptcy. Or can it?

Proving your case

Advocates for student loan relief explain that there are ways to achieve a discharge of your student loan, but it is a difficult process. In fact, the procedure involves litigation during which you must prove that the loan repayments are a hardship for you. Most bankruptcy courts, including those in New York, use the Brunner test when defining undue financial hardships.

The Brunner test involves three factors:

  1. Does the loan repayment make it impossible for you to sustain a minimal standard of living?
  2. Is that substandard level of living likely to persist for most of the duration of the loan payment?
  3. Have you made a good faith effort to repay the loan?

A good faith effort might include making payments in proportion to your income allowance. You may also present to the court evidence of the diligence with which you pursued an administrative discharge or modified payment plan through the Department of Education as a mark of your good faith efforts.

Someone to fight for you

While some say it is possible to win a student loan discharge without legal aid, a more successful and less strenuous path may be to enlist the help of an attorney. The bankruptcy process can be complicated and risky if you are unfamiliar with its requirements and repercussions. A lawyer can make sure you avoid the pitfalls that may come to an unsuspecting debtor.

Your attorney will carefully evaluate your situation to determine if bankruptcy is the best path for you to take or if there may be other alternatives that would bring you a more positive outcome. You can be assured that by choosing the right attorney, you will have someone working for you whose only goal is to help you reach financial freedom and make a fresh start.

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