Student loans are not dischargeable in a bankruptcy proceeding…unless you can prove what is known as “undue hardship”. Meeting the undue hardship test is difficult. The fact that paying the loan puts you under severe financial pressure is not enough to buy you a discharge. It has to be way more than that.
The test in Florida has been clarified over the years, and as of now seems to be:
(1) That the debtor cannot maintain, based on current income and living expenses, a “minimal” standard of living for herself and her dependents if forced to repay the loans;
(2) That additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period of the student loans;
(3) That the debtor has made good faith efforts to repay the loans.
This three-prong test looks at three different time periods. The first prong focuses on the present ability of the debtor to repay the debt. The second prong looks to the future to determine the unlikelihood that the debtor could become able to repay the loan. The third prong looks to the debtor’s past conduct to determine whether her actions in the past have manifested a good faith effort to repay that which she owes. The debtor bears the burden of proving each prong of the test by a preponderance of the evidence.
To get a discharge, first, you have to file a bankruptcy. Then you have to file what is known as an “adversary proceeding”….a lawsuit inside your bankruptcy. Adversary Proceedings lead to discovery, the sharing of documents and information needed by each side to prove their case, and then a trial, where the bankruptcy judge will hear the evidence and make the call.
Good bankruptcy lawyers do a thorough investigation upfront, including evaluating your case from the student lender’s point of view, before taking your money to file an adversary proceeding.
If you want to read more about how courts perceive student loan discharges, google these cases:
Brunner v. New York State Higher Educ. Servs. Corp., 831 F.2d 395 (2d Cir. 3 Case: 16-12884 Date Filed: 04/19/2017 Page: 3 of 9 4 1987) (the “Brunner test”). See Helman Ins. Corp. v. Cox (In re Cox), 338 F.3d 1238, 1241–42 (11th Cir. 2003).
Educ. Credit Mgmt. Corp. v. Mosley (In re Mosley), 494 F.3d 1320, 1324 (11th Cir. 2007).
As a Jupiter Bankruptcy Lawyer and Palm Beach Gardens bankruptcy lawyer, I am readily available to assist you with student loan questions. Call me at (561) 220-2528.