Student Loans

As a general rule student loans are not discharged in any bankruptcy (7, 11, or 13). In order to have a student loan discharged the debtor must file a Complaint against the student loan creditor during the pending bankruptcy and prove that the student loan will create an undue hardship on the debtor.

Filing a complaint initiates litigation which eventually will lead to a trial. In the mean time, the creditor may perform discovery, take depositions, and file various motions.

If no settlement is reached, the trial will commence and the court will determine whether there is undue hardship. To reach that conclusion, the Court uses a 3-pronged test called the Brunner Test. The Brunner Test requires the debtor to prove:

1. The debtor cannot maintain a minimal standard of living if forced to repay the loan (based on current income & expenses);

2. Additional circumstances exist indicating that these circumstances are likely to continue;

3. That the debtor has made good faith efforts to repay the loan

The burden of proof for a debtor in these cases is very high and difficult to meet. This is especially true since there are various repayment options for student loan debtors. It is clear that failure to use one of the repayment plans is a factor unfavorable to the debtor.

The United States Department of Education, William D. Ford Federal Direct Loan Program offers the Income Contingent Repayment Plan. Once a student loan debtor is on an ICR plan, monthly payments are calculated on the basis of adjusted gross income, family size, and total amount of Direct Loan debt. This can give student loan debtors the flexibility and breathing room they need during difficult times.

The maximum repayment period under an ICR plan is twenty-five years. If a debtor makes payments under an ICR plan for 25 years, and there are still amounts left owing, those unpaid amounts are forgiven.

Information on ICR plans and other Direct Loan repayment options can be found at or by calling 1-800-848-0979.