When it comes to declaring bankruptcy in order to avoid paying off government student loans, borrowers must prove that continuing to pay a loan would cause undue hardship. In the 11th Circuit, we have what is commonly known as the Brunner Test.
Outside of the Bankruptcy Courts, an individual may also qualify for a discharge of their student loans. The Department of Education has a set of criteria that constitute what undue hardship actually is, and who is eligible for this type of relief.
If you are considering bankruptcy, it is important to speak with an experienced bankruptcy attorney that also has experience with student loan terms. Prior to meeting with your attorney, here are some of the things that you may want to further discuss.
Undue Hardship Definition
According to the Department of Education, here are the criteria for declaring undue hardship in relation to student loans and bankruptcy.
- Veterans that have been considered by the Department of Veterans Affairs to be unable to find employment as a result of a service-related injury.
- Whether or not a borrower’s health has changed significantly since the original loan amount was determined.
- Whether or not a borrower has tried to pursue other loan terms including Income Sensitive Repayment. If you are attempting to claim undue hardship but have not tried to declare Income Sensitive Repayment or settle on any other loan terms with your lender, a lender may not accept an undue hardship claim.
- Whether or not a debtor has filed for bankruptcy due to circumstances out of his control, and whether or not those circumstances will impact the debtor’s ability to repay a loan.
There are many other factors that go into determining whether an undue hardship claim will be accepted as a reason for federal student loan relief. Rather than try and argue this claim on your own, it’s best to speak with a qualified attorney today in order to determine whether or not you can make this claim, and how you can defend this stance.
Defining Undue Hardship
As it stands, Congress has not technically defined what “undue hardship” is. As such, it is often the decision of federal courts to determine whether or not this claim is valid. In order to determine the validity of such a claim, the court system uses two different methods to weigh criteria. These methods are often tricky and do contain a number of different factors. Essentially, it is up to you (the debtor) to prove that you cannot repay a loan without putting yourself into financial ruin - not an easy thing to do.
While it might seem like claiming undue hardship following bankruptcy is the best and fastest way to get out of paying a federal student loan, this is not the case. Most of the time, it’s difficult to make this claim stick, and lenders do challenge every case that is brought forth. So how can you avoid paying a federal student loan if you have no other choice but to declare bankruptcy? Speak with a bankruptcy attorney today to see what your options are, and make sure that you have the right attorney on your side when it comes to fighting your claim in court.