It is widely assumed student loans cannot be discharged in bankruptcy. You may have seen countless news articles, pundits on television and even lawmakers espouse this claim. If you are struggling with student loan debt, believing this myth may result in a lost opportunity. You can receive an undue hardship discharge under the right circumstances.
How Do You Receive an Undue Hardship Discharge on Student Loans?
Kansas courts use the Brunner test. This test requires you to show that you are incapable of maintaining a minimal standard of living, that your situation is unlikely to change, and that you have made a good faith effort to repay your loans.
Missouri courts use the totality of circumstances test. This test looks at your past, present and future circumstances to determine undue hardship. It also weighs your reasonable and necessary living expenses, and other relevant facts and circumstances to your case. Unlike the Brunner test, the totality of circumstances test does not require you to show a good faith effort to repay your loans.
The very act of filing for bankruptcy on student loans may lead to a reduction in your student loan debt. Instead of risking a full discharge, your lenders may offer to reduce the amount you owe.
While many people will not qualify for a discharge, that should not stop you from exploring your options. You may be able to show undue hardship, but you will never know unless you try.
Kansas City bankruptcy attorney Neil Sader was the subject of a Missouri Lawyers Weekly article after helping a client settle $400,000 of student loans for $150,000. He was also featured on the front page of Reddit when he hosted an AMA on student loans and bankruptcy.