As many of our readers in Colorado may know, many people in our nation are struggling under an insurmountable amount of student loan debt. Many factors, including the economy, job markets and skyrocketing tuition prices, have led many people to take out student loans that they are ultimately unable to pay back. Unlike other types of loans, generally, student loan debt cannot be discharged through Chapter 7 or Chapter 13 bankruptcy. However, there are always exceptions to the rules, and in very limited circumstances a person may be able to discharge their student loan debt through bankruptcy.
In order to have your student loans discharged through bankruptcy, you must be able to prove that paying back the debt would inflict an “undue hardship” on you and your dependents. Undue hardship is often determined using the “Brunner test.” There are three prongs to this test.
First, borrowers must show that, based on their current earnings and expenses, they would not be able to meet a “minimal” standard of living if forced to make payments on their student loan debt. Second, borrowers must show that these existing circumstances will probably continue for a substantial duration of the repayment period. Third, borrowers must show that they have tried in good faith to pay back the loans.
Under very limited circumstances it may be possible to have your student loan debt discharged through bankruptcy. However, even if your student loan debt cannot be discharged, by filing for Chapter 7 or Chapter 13 bankruptcy you may free up more income that could be funneled towards paying back your student loans. Those who are struggling with student loan debt may want to determine if filing for bankruptcy is right for them.