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Proving “Undue Hardship” to Discharge Student Loan Debt

Americans are now burdened by $1.75 trillion in student loan debt. That’s twice as much as the $856 billion Americans owe on credit cards. Not surprisingly, a large number of people who file for bankruptcy have student loan debt. Unfortunately, only about 1 percent of them even try to get that debt discharged. Part of the reason is that there is a perception that they are not legally allowed to do so. But the reality is that student debt can be discharged upon proof that the debtor will otherwise suffer “undue hardship.”

Obtaining student loan relief in bankruptcy requires bringing an adversary proceeding — sort of a trial within a trial. During this proceeding, you and your lawyer will need to show that you satisfy a three-part test — known as the Brunner test — that bankruptcy courts use to determine whether undue hardship exists. You must demonstrate all three of these factors:

  1. You cannot maintain a minimal standard of living if forced to repay the student loans — You will satisfy this part of the test if you have little or no money left over after paying for food, housing, clothing, medicine and other essentials.
  2. You are unable to maintain a minimal living standard for the entire duration of the loan term — This means that illness, disability or other serious issues may prevent you from paying back the loans now and into the future.
  3. You have made good faith efforts to repay the loans — You’ll need to show that you genuinely tried to make payments and perhaps worked with the lender to adjust your payment plan but could not find a workable solution.

It is important to understand that these three factors apply to every person differently. For example, there are no objective standards for what counts as “good faith efforts to repay.” The judge will look closely at the facts of your specific situation when making the determination. However, debtors who try to meet the Brunner test stand a decent chance of success. Full or partial student loan discharges are granted to about half of bankruptcy filers who seek this relief. This is why retaining a very experienced Georgia bankruptcy lawyer to present your case can make a significant difference in the outcome.

Jeff Field & Associates is dedicated to helping people get out from under the burden of student loans and other debt. We serve clients throughout the Atlanta area, through offices in Athens, Douglasville, Gainesville, Lawrenceville, Marietta and Scottdale. Please call 404-381-1278 or contact us online to arrange a consultation.

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