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Undue Hardship and Student Loans

Prior to the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) of 2005, private student loans were dischargeable. However the BAPCPA changed that. It is a general fact that under the Bankruptcy Code, student loans are not dischargeable. However, under certain circumstances debtors strapped with student loans can discharge them through bankruptcy. The exception falls under undue hardship.

Standards that some courts use to determine whether undue hardship exists are the following:

  • If forced to repay the loans, the debtor is unable to maintain a minimal standard of living for self and dependents, based on current income and expenses
  • Circumstances indicate that this state of affairs is likely to persist for a significant portion of the student loans’ repayment period
  • Debtor has made a good faith effort to repay the loans
  • These standards arose out of the case Brunner v. New York State Higher Educ. Servs. Corp.
  • Claiming undue hardship requires filing an adversary proceeding with the bankruptcy court. Your bankruptcy attorney can evaluate the prospects of success for you and, if advisable, do this for you.

If your main source of debt is a student loan, before filing bankruptcy you should consult a bankruptcy lawyer about the prospects of successfully asserting undue hardship. Of course, discharging other debts through bankruptcy may enable you to overcome hardship and repay the student loan. The bankruptcy court also considers your ability to pursue other options and overcome debt when determining whether you meet undue hardship qualifications.

There also are many alternatives that could be pursued directly with the lender and/or the student loan program administrator.

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