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| less than a minute read

Did the path to discharge student loans just get wider?

While it is difficult to discharge student debt in bankruptcy, it is not impossible.  The "Brunner test"  was recently applied in the Southern District of New York, discharging student debt in excess of $200,000.   This standard has been successfully applied in the Western District of New York as well.  

While the specific facts of each case do matter, an additional factor to consider is that the discharge of student loans in bankruptcy require the filing of an  "adversary proceeding" or lawsuit against the lender. Like any lawsuit, this means time and money to prove the debtor meets the Brunner standard.  

As an alternative, some lenders are willing to apply the Brunner standard administratively and without the time and cost of a lawsuit.  Again, the facts of each case are treated separately. 

In her ruling, Judge Morris said most bankruptcy professionals and laypeople “believe it impossible to discharge student loans.” She said she would not perpetuate those “myths” and would apply a legal test developed in 1987 “as it was originally intended.” The standard, known as the Brunner test, requires borrowers seeking bankruptcy relief from their student debt to show they cannot maintain a minimal standard of living, their circumstances are likely to continue for a significant period and they have made good-faith efforts at repayment.


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