Discharging Student Loans

Solutions from a Phoenix Bankruptcy Lawyer

When you are overwhelmed by financial burdens, bankruptcy may offer you a way out. Chapter 7 and Chapter 13 bankruptcy can help individuals wipe out some of your debts. This is known as "discharging" a debt. In certain circumstances, you may even be able to discharge your student loan debts. However, this requires individuals to take special measures during bankruptcy.

If you are attempting to discharge your student loans, contact Leonard V. Sominsky, ESQ., PC. Our bankruptcy attorney in Phoenix has been handling complex bankruptcy cases since 2000, and he continues to serve his clients with dedicated representation and effective legal guidance. Discharging your student loans may be an essential step in the process of getting back on your feet and securing a rewarding future.

How Do I Start the Process?

To begin the process of having your student loans discharged, you must file a Complaint to Determine Dischargeability, which is separate from your bankruptcy case. After filing the complaint, individuals must meet specific requirements in order for the court to approve the discharge of their student loans. Whether you are filing under Chapter 7 or Chapter 13 bankruptcy, you may be able to have your loans discharged if you meet the requirements.

Passing the Brunner Test

In order to discharge your student loans in a bankruptcy, you must be able to prove that repaying your loans would cause you "undue hardship." Undue hardship is measured by the Brunner test, which requires bankruptcy filers to meet specific criteria in order to be eligible to have their student loans wiped out.

The requirements of the Brunner test are the following:

  • Poverty – You cannot maintain a standard of living while also paying loans
  • Persistence – Your finances will likely stay the same during repayment
  • Good faith – You made an effort in good faith to repay your student loans

You may have made every possible effort to repay your debts, but sometimes a situation may be too difficult to handle on your own. Look to the future with a Phoenix bankruptcy lawyer at our firm and take positive steps to eliminate your financial burdens. We understand that individuals are not always at fault—retain the help of an experienced legal professional and set things right.

Meeting the Persistence Requirements

One difficult aspect of discharging student loans is meeting the "persistence" requirement of the Brunner test. It may be hard to determine if your financial situation will remain the same for the majority of a repayment period. If there is no evidence, a court may presume that your income will increase over time, making it possible for you to repay your loans. However, a 2006 court case ruling referred to as "In re Nys" has created several other circumstances that may be considered in the Brunner test.

There are several factors affecting persistence in the Brunner test, such as:

  • Serious mental/physical disability
  • Obligations to dependents
  • Lacking/limited/poor education
  • Number of years remaining in work life
  • Lack of assets
  • Lack of better financial options

Get Temporary Relief If You Cannot Discharge Your Debt

If you are unable to discharge your student loans, there are other options that may be available. With Chapter 13 bankruptcy, you may establish a payment plan for your student loans that reduces payments over the course of three to five years. If you have federal student loans, the Department of Education may help to make your payments more affordable, or even cancel the loan entirely.

Leonard V. Sominsky, ESQ., PC has helped over 1,000 Arizona residents ease their financial burdens. Discuss your situation with our bankruptcy attorney in Phoenix and find out which course of action may offer you a favorable resolution.

Schedule a free case consultation and explore your options!

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