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Undue Hardship in Bankruptcy: Why Brunner Couldn't Discharge Her Student Loans

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Whether or not student loans are dischargeable in bankruptcy is determined by whether forcing you to pay would create an "undue hardship." This term has been defined through a line of cases starting with the case of In re: Brunner and the Three Part Test it created.

But the more interesting question is, did Brunner herself prove undue hardship to the court in New York? Unfortunately, she did not.

Part 1: Easy!

In order to prevail in this test, all three parts must be proven. The first one is usually the easiest. Just provide income and expense information to show that you cannot maintain a minimal standard of living if you had to pay the loan.

Part 2: Fail!

But then comes the second part, proving that this state of affairs is likely to persist for a significant portion of the repayment period. Here, Brunner was not able to prove this because, as the court observed:

  • She was not disabled
  • She was not elderly
  • She had no dependents
  • There was no evidence of "a total foreclosure of job prospects in her area of training"
  • It had been only 10 months since she had graduated from her Master's program.

Part 3: Fail!

Then there is the third part, where you must show a good faith effort to repay the loan. This is somewhat of a Catch-22 in that you are seeking to discharge it because you cannot pay it, so how could you have paid any of it? The court in Brunner does provide some insight here by pointing out that:

  • The bankruptcy petition filed within a month of the date the first payment on her loans became due
  • She did not first request a deferment, which might have gotten her more time to change her economic circumstances

The court did note, however, that all was not lost for Brunner. She could always try again later if circumstances change to the point where facts exist to support all three parts of the test.

As you can see, the cases that determine the existence of "undue hardship" are very fact driven.

Do YOU Pass the Test? Let Me Help You Find Out!

If you live in the Gloucester County New Jersey area, are considering bankruptcy because of student loans, or filed bankruptcy in the past and believe that you would pass the Brunner test now, please feel free to call my office at 856-432-4113 or contact me through this site to set up an appointment to discuss your case. I can step you through it and see what can be done!

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