When people ask whether student loans can be eliminated by filing bankruptcy, the usual answer given is an emphatic "NO!". However, it is possible to have your student loans discharged with a bankruptcy. It requires filing a special motion with the Bankruptcy Court.
What do you have to show when you file your motion with the court? According the Bankruptcy law, you must show the court that your student loans cause you an "undue financial hardship". Many courts around the nation use what is know as the "Brunner Test" which outlines when student loans cause an "undue financial hardship."
The Brunner Test says you must show:
- You cannot maintain a “minimal” standard of living for yourself or your dependents if forced to repay the loans (this is based on your income and expenses);
- Circumstances exist that show that your current situation is likely to persist for a significant portion of the repayment period of the student loan (must be able to show that you will not have the future ability to repay these loans, i.e- you have a disability)
- You have made a good faith effort to repay your student loans.
Based on the Brunner Test, it is possible to show an undue financial hardship, but it is a difficult thing to prove.