Are my student loans dischargeable in a bankruptcy?

Are my student loans dischargeable in a bankruptcy?

Discharge of student loans is only allowed if the debt would impose undue hardship on the debtor.[i]  Under the statute, “undue hardship” is not defined. Multiple courts (including the Ninth Circuit) have adopted a three part analysis for whether or not the student loans create an undue hardship, first laid out in Brunner v. New York State Higher Educ. Services Corp., 831 F.2d 395, 396 (2d Cir. 1987).

The three part test is:

(1) that the debtor cannot maintain, based on current income and expenses, a “minimal” standard of living for herself and her dependents if forced to repay the loans;

(2) that additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period of the student loans; and

(3) that the debtor has made good faith efforts to repay the loans.

To discharge student loan debt, the debtor must prove all three prongs.  The analysis below gives some examples of how courts apply the three part test.


The first prong:

In determining whether or not a debtor has satisfied the first prong of the Brunner test, the Ninth Circuit did not require a debtor to work more than forty hours a week. The court held that this would be “unconscionable” and cause a debtor to fall below a “minimal standard of living.” However, requiring the debtor’s wife to work three days instead of one, while free child-care was readily available, was not unconscionable.[ii]

The first prong may also be satisfied even if a debtor is exceeding guidelines for monthly expenses. For example, when a family was exceeding expense guidelines for laundry, prescriptions and electricity, the court held that the debtor was only maintaining a “minimal” standard of living and not living beyond that.[iii]


The second prong:

The second prong requires the debtor to show that they are unable to pay now and inability to pay will persist in the future. Therefore, “the focus of this inquiry is the debtor’s financial situation.” In analyzing whether or not a debtor has demonstrated “that additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period of the student loans” courts will look to a variety of variables.  Some of those are:

  1. Serious mental or physical disability of the debtor or the debtor’s dependents which  prevents employment or advancement;
  2. the debtor’s obligations to care for dependents;
  3. lack of, or severely limited education;
  4. poor quality of education;
  5. lack of usable or marketable job skills;
  6. underemployment;
  7.  maximized income potential in the chosen educational field, and no other more lucrative job skills;
  8. limited number of years remaining in [the debtor’s] work life to allow payment of the loan;
  9. age or other factors that prevent retraining or relocation as a means for payment of the loan;
  10. lack of assets, whether or not exempt, which could be used to pay the loan;
  11. potentially increasing expenses that outweigh any potential appreciation in the value of the debtor’s assets and/or likely increases in the debtor’s income;
  12. lack of better financial options elsewhere.[iv]


For example, in Hedlund, the court held that Mr. Hedlund lacked usable or marketable job skills that are necessary to practicing law.  Mr. Hedlund graduated from law school in 1997 but was unable to pass the state bar after two attempts.  He then worked non-legal jobs earning about $40,000 before filing bankruptcy in 2003. Further, he and his wife had no assets and there were not better financial options elsewhere, given the costs of moving and increased living costs. Therefore, the debtor satisfied the second prong of the test.

In another example, the debtor was a well-educated and intelligent dance instructor with promising future prospects for employment. Further, she lacked insurmountable barriers, such as mental or physical problems, and had no “extraordinary non-discretionary expenses.” Therefore, the court said she did not fulfill the second element of the Brunner test requiring the current state of affairs to persist for the repayment period of the loan.[v]


The third prong:

 In order to satisfy the third prong of the test a debtor must prove that they have made good faith efforts to repay the loans. For example, in Hedlund, the court held that Mr. Hedlund had not made a good faith effort to repay the loans specifically because he “[had] not met his burden of proof… Hedlund not only neglected to maximize his income, minimize his living expenses, and make voluntary payments, but he has also failed to take any steps toward renegotiating an alternative repayment plan. These factors are not beyond his reasonable control.”

Likewise, in Birrane, the debtor did not work full time, thus failed to maximize her income. Further, she failed to make any efforts towards renegotiating her repayment plan via an income contingent repayment plan. The court said that these two decisions, taken together, showed a lack of good faith effort to repay the loan.

On the other hand, in one case debtors met the “good faith” requirement by: consistently requesting deferments, consistently requesting forbearances, negotiating a repayment plan with the U.S. Department of education, paying a significant portion of one of their loans, making thirty payments towards one of their loans, for a total of $3,541.25, and being informed that there were no further options available on certain loans[vi]


The Department of Education deferred my loan and I’m paying $0 per month, under an income contingent repayment plan will I be able to prove “undue hardship” necessary to discharge the loan?

Yes.  An administrative agency’s determination that a debtor is unable to make payments towards a loan balance does not preclude the court from discharging the debt after applying the Brunner  “undue hardship” test.[vii]


Will the bankruptcy court make me work more than full-time to pay back my student loans?

Probably not. In the past, the court held that forcing a debtor to work more than full-time to pay back student loans was “unconscionable.” However, this is a factual determination made by the court on a case by case basis.


Are there other examples of “additional circumstances” that fulfilled the second prong of the Brunner test?

                Yes.  Some more examples are listed below. Please note, however, that these examples satisfy only one part of the Brunner test, and you must consider the other prongs when applying the test.

  • A husband whose income-earning potential was not increased by the education he received combined with a wife with long-term serious mental illness which was likely to continue to interfere with an individual’s ability to work was sufficient. The mental illness included stabbing pains, hearing voices, psychotic episodes, periods of hospitalization, and the inability to hold a job for more than six months to a year.[viii]
  • A 42 year old teacher at the top of her pay grade, with uncertain opportunities to move to a higher grade or obtain more education proved sufficient “additional circumstances.”[ix]
  • A law school educated person with an established learning disability who couldn’t pass the bar or work in traditional attorney positions.[x]
  • A person with severe acquired attention deficit disorder (ADD) who was unable to finish medical school, was working in real estate and was living below the poverty level satisfied the requirement.[xi]
  • A trained chiropractor with a medical degree, was unable to practice in either field  because of an injury and failure to pass medical boards.[xii]

Examples of Additional Circumstances That Were Not Sufficient:

  • A social worker who was employed and had already received two salary increases in her three years since graduation, failed to show additional circumstances that would persist.[xiii]
  • A service station manager at a gas station with a history of drug abuse and run-ins with the law but was in line to receive a promotion.[xiv]



[i] Language of §523(a)(8): “A discharge under … this title does not discharge an individual debtor from any debt… unless excepting such debt from discharge under this paragraph would impose an undue hardship on the debtor and the debtor’s dependents, for–

(A)(i) an educational benefit overpayment or loan made, insured, or guaranteed by a governmental unit, or made under any program funded in whole or in part by a governmental unit or nonprofit institution; or

(ii) an obligation to repay funds received as an educational benefit, scholarship, or stipend; or

(B) any other educational loan that is a qualified education loan, as defined in section 221(d)(1) of the Internal Revenue Code of 1986, incurred by a debtor who is an individual;”


[ii] Hedlund v. Educational Resources Institute, 2012 WL 787250

[iii] In re Greenwood,  349 B.R. 795, 800-01 (Bankr. D. Ariz. 2006).

[iv] In re Nys, 446 F.3d 938, 945 (9th Cir. 2006).

[v] In re Birrane, 287 B.R. 490, 494 (B.A.P. 9th Cir. 2002).

[vi] In re Scott, 417 B.R. 623 (Bankr. W.D. Wash. 2009).

[vii] In re Booth, 410 B.R. 672, 674 (Bankr. E.D. Wash. 2009).

[viii] In re Pena, 155 F.3d 1108, 1113 (9th Cir. 1998).

[ix] In re Bossardet, 336 B.R. 451, 456 (Bankr. D. Ariz. 2005)

[x] In re Mason, 464 F.3d 878, 883 (9th Cir. 2006)

[xi] In re Mendoza, 182 F. App’x 661, 663 (9th Cir. 2006)

[xii] In re Blackbird, BAP.WW-07-1454-KJUKU, 2008 WL 8444793 (B.A.P. 9th Cir. July 11, 2008)

[xiii] In re Rifino, 245 F.3d 1083, 1089 (9th Cir. 2001)

[xiv] In re Carter, BAP OR-11-1191, 2011 WL 6989901 (B.A.P. 9th Cir. Nov. 8, 2011)


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