While filing for Chapter 7 or Chapter 13 bankruptcy will wipe away many of your
consumer debts (like outstanding medical bills or even a mortgage), your student
loan debt is exempt from the same treatment unless you can prove an “undue hardship”.
Chapter 13 bankruptcy could help provide relief from paying off your student loan
debt in the short term with reduced monthly payments, but you’d still be on the
hook for whatever loan balance is left after your bankruptcy repayment period ends.
Similarly, you’re still on the hook for your student loan debt if you file for Chapter 7 bankruptcy.
When and How can I discharge my student loans?
If you file for bankruptcy, you can file a separate lawsuit within the
bankruptcy case called an adversarial proceeding.
You would then seek to prove your student loans create “undue hardship.”
Undue hardship is now defined as the “Brunner Test”
The court uses three factors to determine undue hardship.
•You wouldn’t be able to maintain a minimal standard of living if you
were forced to repay the loan.
•Your financial hardship would continue for a significant portion of
the repayment period if you were forced to repay the loan.
•You’ve made a good-faith effort to repay the loan before you filed for bankruptcy.