Bankruptcy can help a person clear outstanding debt to work towards a brighter financial future. Most people claim that student loan debt, which is a burden on the finances of many graduates well into adulthood, can’t be discharged via bankruptcy. While this is generally the case, Nerdwallet explains what steps you can take to get a handle on massive student loan debt.
For many people who file for bankruptcy, getting student loan debt discharged is a separate process. This entails participating in an adversary proceeding, which is a type of lawsuit that exists outside the initial bankruptcy process. You or your legal team will file a complaint that requests the judge considers forgiving student loan debt. In this case, you must prove that you’re faced with some type of financial hardship that makes student loan repayment all but impossible.
The Brunner test is commonly applied by the courts to determine whether a person meets the definition of financial hardship. One way to do this is to show that you’re unable to pay back these loans and still see to daily living expenses in a reasonable manner. You will also be required to show that you attempted to increase your current level of income but have no available means to do so. This usually involves extenuating circumstances.
For instance, if you suffer from a physical or mental disability that limits your ability to earn a gainful income, the court may decide in your favor. You can also take steps to show that the education you received was subpar, which in turn prevents you from securing a position in your field. The court will then review the evidence you submit to determine whether your loans should be discharged. Some people will be denied, while others will have their request approved. The court may also decide to discharge a portion of what you owe to make pay back a bit easier.