Each year, millions of Americans attending college take out loans in order to pay for it. The most unsettling part is that 22 percent of the more than $1 trillion in outstanding student loan debt is in default. Overwhelming student loans have become one of the major debt issues that send Americans’ finances spiraling.
Unfortunately, student loan debt is also one of the most difficult types of debt to discharge in bankruptcy. However, difficult doesn’t mean impossible. Under certain circumstances, you may be able to obtain a discharge for your student loans.
WHEN CAN STUDENT LOANS BE DISCHARGED IN BANKRUPTCY?
While it is possible to discharge your student loan debt in a Nevada bankruptcy, the truth is it exceedingly difficult to do. A bankruptcy court will only agree to discharge student loan debt for debtors that can show repayment would be an extreme burden. According to the bankruptcy code, this standard is known as “undue hardship.”
By design, undue hardship is a difficult standard to meet. There isn’t a simple definition of what constitutes undue hardship, but the courts have developed a test used to identify whether undue hardship is present. Known as the Brunner Test, the three factors bankruptcy courts use to determine whether an undue hardship is present are:
- Whether attempting to repay the student loans would leave you unable to maintain a minimal standard of living;
- Whether the state of your finances will persist for a significant part of the loan repayment term; and
- Whether or not you made a good faith effort to repay your student loans.
The first factor may be the easiest to prove. Many people considering bankruptcy are overwhelmed by debt, and being forced to pay down student loans could leave basic needs unmet. However, the second prong of the test is more difficult to prove. Most people with stable jobs can expect a steady increase in income over the course of their career, which could make it difficult to show the state of their finances won’t improve over time. There are a series of factors the court considers when determining if the second prong was met, including:
- Limited or low-quality education
- Mental or physical disabilities that interfere with employment
- Lack of marketable skills
- Underemployment
- Obligations to dependents
- Lack of assets
- Limited financial options
If a court finds that you meet all three factors of the Brunner Test, the judge can consider the repayment of your student loans an undue hardship. If that is the case, you will then be able to seek to discharge your loans in bankruptcy.
DISCUSS YOUR STUDENT LOAN DEBT WITH A LAS VEGAS BANKRUPTCY ATTORNEY
A finding of undue hardship is rare, but it is possible that a court may rule that one exists in your case if you meet the three prongs of the Brunner Test. Meeting these requirements is no simple task, and having an experienced bankruptcy on your side is your best chance at having your student loan debt declared an undue burden. To discuss your case with an experienced Las Vegas bankruptcy attorney, contact Rory Vohwinkel at Vohwinkel Law today.
