Student Loan Debt and Bankruptcy: Using the Brunner Test to Determine Debt Forgiveness
It's possible that finding student loan debt help might be of no help to you currently, and filing for bankruptcy may be on your mind. This might occur if you're saddled with a student loan and happened to lose your job you had not long after graduating from college. Because student loans aren't as negotiable as credit card debt would be, complete forgiveness through a bankruptcy would have to be strongly considered. But can your student loan really be forgiven in a bankruptcy court?
It's all going to depend on what you've done in your recent past and the prospects of your future. That's all determined through what's called the Brunner Test.
Good Faith Efforts
The Huffington Post reported earlier this year that far too many people never try to get their student loans forgiven in bankruptcy cases. That may be due to the guilt surrounding them and the desire to want to pay them back with good faith efforts. It's the good faith effort that will be considered by a bankruptcy court when you file. The bankruptcy process, though, will have to be done separately in an adversary proceeding.
It's ultimately going to take more than good faith efforts to have your loan forgiven. There may also be some complications if you happened to find a part-time job that helps you at least stay afloat financially.
Undue Hardship and Analyzing Your Financial Future
The bankruptcy court will take into account whether you paying on the student loan would bring undue hardship to your life. This might still apply, even if you're working in a low-wage, part-time job one year prior to filing bankruptcy. That's because the money you're making goes to your basic survival and would threaten your basic livelihood if applied to the loan.
A university providing your student loan could possibly contest this. Any key decision by the court, though, will have to be based on an analysis of your job prospects in the future. The court will look at your employment situation and determine whether there's any real chance of you obtaining a job that pays well in the immediate future. If it's determined you probably won't, the court will allow the loan to be forgiven.
In legal terms, this is sometimes referred to as "certainty of hopelessness."
What About Private Student Loans?
While most student loans are typically from the federal government, a private loan from a university can pose some problems. The Chicago Tribune reminds the latter can't be forgiven in bankruptcy cases and will require you to either find some way of paying it back or letting your state's statute of limitations take effect. In most states, letting a debt go for around seven years will have it removed from your record. This only applies if you're judgment proof from undue hardship and can't be expected to pay.
To deal with all this, you're going to need an astute bankruptcy lawyer to help expunge that student loan from your life. Consider the Law Office of Robert Kovacs representing Framingham and Worcester, Massachusetts. Contact us and we can show you how effective the Brunner Test can be in helping you with your entire bankruptcy case.