Eliminating student loan debt would be awesome, right?

But the reality is, student loan borrowers have few programs to get rid of their loans.

Sure, there’s Public Service Loan Forgiveness and income-based repayment forgiveness. But the problem with those two is you have to work for the government or a nonprofit to qualify for the PSLF program and IBR loan forgiveness takes too long.

With those options off the board, you’ve probably found yourself Googling, “can you file bankruptcy on student loans?”

The answer is, of course, you can file bankruptcy on federal student loans and private student loans.

The real question, however, is:

How to prove undue hardship for student loans?

That question matters because undue hardship is what you’re going to have to prove if you want bankruptcy to clear your student loan debt.

So that’s what we’re going to learn how to do in this post.

We’ll also walk through how to start the bankruptcy adversary proceeding.

But before we get to the undue hardship tests, let’s go over the basics.

1. Can Student Loans be Included in Chapter 7 Bankruptcy

Here’s the deal:

When you file bankruptcy, you have to list all of your debt. You don’t get to pick and choose. If you owe somebody for something when you file bankruptcy, you have to list them.

But just because you list the debt doesn’t mean that debt is included in your bankruptcy discharge. Certain debts will remain with you after your bankruptcy ends.

Student debt is one of those debts.

This wasn’t always the case.

1.1 When Did Student Loans Become Nondischargeable

Not until the late 1970’s did student loan bankruptcy laws come to exist.

Before then, student loans were treated like any other debt.

You could get a full discharge of all your debt — including erasing your student loan debt —without having to do anything extra.

But then, the Bankruptcy Code changed.

And they kept changing for the next 3 decades.

Not until 2005 did the changes stop.

And when they finally did, the end result was clear:

Americans would find it incredibly hard to get rid of student loans made by the U.S. Department of Education and private financial institutions.

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With our history trip complete, let’s return to our original question:

Can you file bankruptcy on student loans?

Yes.

Now let’s learn how to do that.

2. How to Get Student Loans Discharged

The process of getting student loans discharged is a simple two-step process:

File a bankruptcy case. You can file a chapter 7 bankruptcy or chapter 13 bankruptcy. File an adversary complaint. This is the lawsuit you file to discharge your student loans as an undue hardship. You file the adversary after you file bankruptcy.

While the process is simple, the road to completing the process is anything but.

The Bankruptcy Code places a burden on you to prove that repaying your student loan debt would cause you and your dependents an undue hardship.

So how do you prove that?

Well, before we get into how to prove undue hardship, we should define that phrase so we understand what it means.

3. What is Undue Hardship for Student Loans

Let me make one thing clear:

Undue hardship for student loans hasn’t been defined.

Not by the U.S. Department of Education.

Not by Congress.

Not by the Bankruptcy Code.

This lack of a definition of undue hardship has forced bankruptcy courts to try and define it for themselves to analyze whether a debtor’s entitled to a student loan discharge

At first, courts, in the absence of direction from Congress, turned to dictionaries. But that approach failed because it left people confused over what exactly was an undue hardship.

Enter uniform standards aka tests.

The first test was the Johnson test.

Then came the Bryant test.

After that came the Brunner test. (More on this one later.)

And then from there, came the totality-of-the-circumstances test.

Four tests. Plenty of court cases. And still, we’re no closer to a uniform definition for “undue hardship”.

So if we don’t have a universal definition, what do we have?

Well, here’s what we know…

3.1 The Brunner Test and Student Loans

To prove undue hardship under the Brunner test, you have to the burden of proof to show that:

You’ll have less than a minimal standard of living if forced to repay your loans; Your financial situation is likely to persist; and You made a good-faith effort to repay your loans.

The next question, of course, is how do you prove the three prongs of the Brunner test?

Sidenote: The Brunner test comes from a bankruptcy court case in the 1980’s, Brunner v. New York State Higher Education Services.

Admittedly, there’s no one answer.

That said, we can look to past cases to see what facts bankruptcy judges have found favorable

So let’s do that.

Starting with…

3.1.1 Minimal Standard of Living

Here’s the deal:

Just because you’re not living a life of luxury doesn’t mean you have a minimal standard of living.

In most cases, your living situation needs to be pretty bad to pass this part of the test.

For instance, here are some facts courts have said meet the minimal standard of living prong:

Having a current income below the federal poverty guidelines for several years before filing bankruptcy

Qualifying for food stamps or Social Security benefits

Living rent-free in property owned by parents and still being unable to provide for minimal living expenses

Owning virtually no assets

Suffering from debilitating psychological conditions that prevent you from earning more than a nominal living

Having greater expenses than income while demonstrating you live frugally

Losing your job because of your physical/mental disabilities

Working for several years in a low-paying hourly job with no prospect of earning a greater income because you don’t have a degree or your degree is worthless

Lacking the ability to make the monthly payment required under an income-driven repayment plan

Living near the poverty level with a demonstrated inability to pay minimal living expenses and the required monthly payment on student loans

Supporting minor dependents with monthly disability payment while having to use almost half of that payment to cover monthly student loan bill

Covering the living expenses for multiple minor dependents solely with government benefits

Showing that if you were forced to pay your monthly student loan payment you would fall into abject poverty

3.1.2 Likely Persistence

This prong of the Brunner test isn’t about your past choices.

It’s all about your current circumstances and what those circumstances have to say about your future financial situation.

Basically, likely persistence forces a bankruptcy judge to predict your future.

But how does a judge do that?

How do they prove things won’t change for the better in the future?

That’s admittedly hard to do.

Still, that’s the question that needs answering.

Here are a few examples of instances where a judge has found persistence:

Debtor suffered permanent debilitating injuries in a car accident that stunted her ability to find steady employment.

Debtor, a single mother to four minors, proved she had hepatitis C, anemia, hypertension, and depression. Combined, those things made it hard for her to find steady work.

Debtor’s husband required constant nursing care due to his physical and mental impairments. The court found that those impairments would last for most of Debtor’s payment period.

Debtor was morbidly obese. She also suffered from diabetes and persistent leg wounds. The latter of which prevented her from working and interfered with her ability to care for herself and her two children.

Debtor lived below the poverty level for several years and was sometimes homeless as well. Additionally, Debtor twice flunked out of law school, had little professional skills, and suffered from advanced glaucoma.

3.1.3 Good Faith

The good faith part of the test is perhaps the easiest to satisfy.

You need to show the number of payments you’ve made and any attempts you made to negotiate with your lender.

This includes payments you’ve made to your loan holder under any of the income-driven repayment plans, including income-based repayment. And it also includes the deferments and forbearances you may have requested.

Other factors that may help include, whether:

You’ve incurred substantial expenses beyond those required to pay for your basic necessities

You tried to restructure your loan before filing your bankruptcy petition

Your failure to repay your student loans were due to circumstances out of your reasonable control

You used all available resources to repay your loans

You gained tangible benefits from your loans

You used (and are using) your best efforts to maximize your earning potential

You tried to minimize your expenses

You waited a sufficient time after getting your loans to file your adversary

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So that’s the Brunner test.

Now, let’s turn to the other test you might need to pass to eliminate your student loans…

3.2. The Totality-of-the-Circumstances Test and Student Loans

In theory, this test is supposed to be easier to show undue hardship for your student loans than under the Brunner test.

But that’s in theory.

In reality, getting rid of your student loans in bankruptcy under this test is just as difficult.

Much like the Brunner test, the totality-of-the-circumstances test has 3 prongs:

the debtor’s past, present, and reasonably reliable future financial resources; the debtor’s reasonable and necessary living expenses; and any other relevant facts and additional circumstances.

The third prong, the “other relevant facts, and additional circumstances”, is why people believe this test is easier to pass.

It allows courts to consider a broad range of relevant information that would be persuasive to overcome the first two prongs.

Here is a list of factors courts have considered under this prong:

Your total present and future inability to pay debts for reasons not within your control;

Your good faith effort to negotiate a deferment or forbearance of payment;

Your good faith effort to maximize income and minimize expenses;

The duration of your hardship (short-term or long-term);

The payments you’ve made on the student loan;

Your permanent or long-term disability (if any);

Your ability to obtain gainful employment in your area of study;

The ratio of student loan debt to total indebtedness; and

Your purpose in filing bankruptcy (if it was to get rid of your student loan debt? ?)

Use these factors as a reference when you’re ready to start the process of…

4. Filing Bankruptcy on Student Loans

Now that we’ve covered what you have to prove to get your student loans discharged in bankruptcy, let’s discuss the how.

File the adversary. Bankruptcy Rule 7001(6) says you must file an adversary proceeding to determine the dischargeability of a student loan.1 Contested matter. You may also have the option to contest the student loan as an abbreviated contested matter under Bankruptcy Rule 9014.2 Consider this if you want to object to the student loan creditor’s claim because it can’t enforce its debt against you or any of your property. Time to file. The time to file an adversary complaint depends on whether you filed a chapter 7 or chapter 13 bankruptcy case. Under Rule 4007(b), you can file a complaint under 11 U.S.C. § 523(a)(8) at any time. That rule also lets you reopen your closed bankruptcy case to file that same complaint without paying an additional fee. Move quickly in a chapter 7. If you’re in a chapter 7, file the complaint quickly. Chapter 7 cases are typically over in about three months. Try and get your complaint on file before you get your discharge. That way you don’t have to bother with reopening a closed cas3e. Move slower in a chapter 13. Things are different if you’re in a chapter 13 case. You’ll likely need to wait before you file your adversary complaint. The reason? Some courts believe they can’t determine undue hardship when the discharge date is far away. Remember, a discharge in a chapter 13 typically takes anywhere from 3 to 5 years. Because of that, you’ll likely need to wait and file your complaint until your discharge date is closer.

5. How to Reopen a Bankruptcy Case to Discharge Student Loans

Let’s say you filed bankruptcy a while ago and got a discharge of everything but your student loans.

Now, you want to try and eliminate your student loan debt but there’s just one problem:

Your case is closed.

So what do you do?

You start by filing a motion to reopen bankruptcy case under § 350(b).

That section allows you to reopen a bankruptcy case in the court that closed your case.

Rule 5010 also plays a role in reopening a bankruptcy case, stating that you or another party in interest may reopen a case by filing a motion.

6. Drafting a Complaint to File Bankruptcy on Student Loans

Here’s the deal:

If you want any shot of eliminating your student loan debt, you need to draft a proper complaint.

The easiest way to do that is to simply state you believe your loans are dischargeable because of undue hardship.

Sidenote: If you have private loans, you may be able to discharge them without proving undue hardship.

Exactly how you do that depends on you, your facts, your writing style, and the rules of your local court.

Here’s something to keep in mind though.

The burden of proof is yours to show that your student loans should be discharged because they’re an undue hardship.

6.1 Undue Hardship Burden

What that means is that for each prong of the Brunner test or the totality-of-the-circumstance test, you have to show by a preponderance of the evidence you satisfy that prong.

Don’t feel bad though.

The creditor has its burdens as well.

First, it has the initial burden of proving that its claim against you is valid. Like you, it must do this by a preponderance of the evidence.

Second, it must prove that your loans meet the nondischargeability terms under § 523(a)(8).

Final Thoughts

Annnnndddd…Done!?

I know that’s a lot to take in. But it was worth it, right?

We know the answer to whether you can you file bankruptcy on student loans is yes.

Just remember, eliminating your student loans in bankruptcy is going to be difficult to do. But it is possible.

Follow the steps above. Talk with a bankruptcy attorney whose not only familiar with student loan bankruptcy laws but has also tried to discharge them.

And if you want my help, you have 2 options: