Boy, it has been awhile since I posted ANYTHING. It is way past time.
I often get questions regarding the dischargeability of student loan debt. Putting aside the political component, what follows is a brief discussion of the legal analysis that will apply to any attempt to discharge student loan debt. Let’s start with the Bankruptcy Code, and specifically, with Section 523, entitled “Exceptions to Discharge.” This is the Code section that delineates those obligations to which a discharge will not apply. Section 523(a)(8) excepts from discharge any student loan debt for which repayment “would impose an undue hardship on the debtor and the debtor’s dependents . . .” The term “undue hardship” is not specifically defined, however, so the courts get to define it.
The leading case on this issue is Brunner v. New York State Higher Education Services Corporation, 831 F.2d 395 (2nd Cir. 1987), in which the court created a three-part test for determining when undue hardship rises to the level required to allow discharge of the debt:
(1) If forced to repay the loan, the debtor would be unable to maintain, based on current income and expenses, a “minimal” standard of living for the debtor and their dependents.
(2) Additional circumstances existed which indicated that that state of affairs would be likely to persist for a significant portion of the repayment period of the student loan.
(3) The debtor had made good faith efforts to repay the loan.
These elements must be established by a preponderance of the evidence.
In the subsequent 35 years, Brunner, and what is commonly known as “the Brunner test,” has become the prevailing test for determining undue hardship in bankruptcy courts nationwide. The Bruner test has specifically been adopted by the Eleventh Circuit. In re Cox, 338 F.3d 1238 (11th Cir. 2003). Within the Middle District of Alabama, this issue was addressed at length by Judge William Sawyer in In re Monique Denise Wheat, Adv. Pro. Number 18-03041. I might also mention in passing that the Department of Justice, working with the Department of Education, has promulgated new guidance which is, I believe, intended to streamline this process. I would encourage anyone seeking to discharge a student loan debt to communicate with DOJ counsel regarding the specifics of the new guidance.
