A college education is more expensive today than ever before. Student loan debt has skyrocketed to unprecedented heights during the past decade, climbing almost 150% from $833 billion around 2007 to the current peak of roughly $1.4 trillion. According to Experian, more than one in 10 Americans has at least one student loan, while the average American has closer to four. If, like so many residents of Pennsylvania, you, your spouse, or your child is struggling to pay off burdensome student loans, consider speaking with a Bryn Mawr bankruptcy lawyer about your options for debt relief. If you can demonstrate that your college loans are causing you extreme financial hardship, the bankruptcy court may allow you to “discharge,” or erase, your student loan debts.
How to Prove Undue Hardship for Student Loans: Passing the Brunner Test
Bankruptcy can have many benefits, including protection against creditor harassment, protection of valuable assets and heirlooms, and even prevention of home foreclosure. However, the primary reason most people file bankruptcy in Pennsylvania is to reduce or eliminate the debts that they owe to their creditors.
In bankruptcy terminology, the elimination of debt is known as a bankruptcy “discharge,” and may only be granted by the bankruptcy court overseeing the filer’s case. For example, the U.S. Bankruptcy Court for the Eastern District of Pennsylvania, Philadelphia Division, has jurisdiction over Bucks, Chester, Delaware, Montgomery, and Philadelphia Counties.
Provided the debtor meets the necessary bankruptcy requirements – which include residency requirements, bankruptcy forms, court fees, mandatory hearings, a debtor education course, and a credit counseling course, among other steps and criteria – the bankruptcy court will likely grant the debtor a discharge. This has the effect of negating the debtor’s liability, or in other words, removing the debtor’s financial responsibility, for debts that are included in the discharge, aptly called “dischargeable” debts.
Regardless of whether the discharge involves Chapter 7, which is the most common type of bankruptcy in Pennsylvania, or Chapter 13, which is also widely used, many debts are covered and can therefore be erased. To provide a few examples, dischargeable debts in both Chapter 13 and Chapter 7 include medical debts, credit card debts, business debts, personal debts (such as debts owed friends and family), and past-due utility bills, such as electric bills.
In contrast, student loans are generally considered non-dischargeable, which means bankruptcy usually does not erase student loan debt. There is, however, an exception to this rule. If the debtor meets certain standards, known collectively as the “Brunner test,” the court may agree to discharge the debtor’s student loan debt. In other words, student loan debt can be erased only if the filer passes the Brunner test, which shows “undue hardship.”
So, what does passing the test and showing undue hardship actually involve? As our West Chester bankruptcy lawyers explain, the Brunner test consists of three requirements which must all be met for the debt to be erased. These requirements are as follows:
- First, the debtor must show that student loan debt prevents him or her from maintaining a “minimal” standard of living. Likewise, if the debtor has children or other dependents, he or she must show that the debt prevents him or her from maintaining a minimal standard of living for his or her dependents.
- Additionally, the debtor must show that his or her financial circumstances are unlikely to change significantly any time in the near future. More specifically, the debtor must show that the present financial circumstances are likely to continue for most or all of the remaining repayment period.
- Finally, the debtor must prove that he or she has made sincere, transparent, and honest attempts to repay the debt to the best of his or her financial ability. This is called “making a good faith effort,” or “acting in good faith.”
To reiterate, all three criteria must be satisfied – one or two is not sufficient. Moreover, it is critical for the debtor to present his or her case with clarity, detail, and respect for the rules and procedures observed by the court. Bankruptcy courts are strict in their interpretations of the Brunner test, and are likely to deny a request to discharge student loan debt if the case is not supported by extensive evidence. By understanding what bankruptcy courts are looking for, and which pieces of information and evidence to emphasize, a Philadelphia Chapter 7 lawyer or Chapter 13 attorney in Philadelphia can help you prepare a stronger, more compelling case as to why your student loans should be discharged.
Philadelphia Bankruptcy Lawyers Can Help Erase College Debt
Student loan debt can cast a dark financial shadow over your life, or that of your son or daughter. If your debt burden has grown too heavy to carry, and your loans are causing extreme hardship in your everyday life, bankruptcy could be an effective long-term solution.
Several bankruptcy options may be open to you, such as Chapter 7 or Chapter 13. You may also wish to explore alternatives to bankruptcy, such as debt settlement, with which our Philadelphia debt settlement lawyers can provide legal assistance. For a free legal consultation about whether bankruptcy or alternative strategies could work for relieving your debt, call the Philadelphia bankruptcy alternatives attorneys of Sadek and Cooper Law Offices, LLC at (215) 995-2543 today.