People with student loans have more to worry about in a New Jersey bankruptcy.  This is because student loans are non-dischargeable in bankruptcy unless the debtor can prove "undue hardship." As a New Jersey student loan debt lawyer and bankrutpcy attorney, I understand the stress and uncertainty you are facing.

With so many people graduating from school with degrees and no job, this creates a real problem. Adding to that is the fact that the Bankruptcy Code, even with the changes under BAPCPA, does not define the term "undue hardship."

What is "Undue Hardship"?

Bankruptcy courts across the country have ruled on what that term means, and in the landmark case of Brunner v. New York State Higher Education Services Corp., 831 F.2d 395 (2nd Cir. 1987), a three-prong test was devised to see whether a debtor owing student loans was truly suffering "undue hardship." A debtor seeking to discharge said loan obligation must prove that:

Although many people can meet the first prong of the test, the other two are the ones that present problems. Therefore, it is clear that any debtor in bankruptcy seeking to discharge a student loan must do more than show current dire financial straits.

A debtor seeking to have student loans discharged in bankruptcy must seek to be employed to the maximum of their potential and address payment in some significant way. With all three prongs addressed, that debtor should be in a good position before the court to convince them of undue hardship.

If you are struggling with a large student loan balance, download my free book, I Graduated; Now What? A Guide to Dealing with Your Student Loans. 

Steven J. Richardson
Connect with me
Bankruptcy, Collections, Student Loan, DUI and Traffic Court attorney in Woodbury, NJ.