The single word answer to this question is, “yes.” However, there is much more to be said and many more complexities regarding this subject. It is not impossible to obtain a discharge of a student loan within a bankruptcy, but it is certainly no easy task. It is also not a task that is often successfully completed.
In order to be granted discharge of a student loan by a federal bankruptcy Judge, one must be able to prove that paying the loan back would create what is known as, “undue hardship.” While proving this standard is difficult enough on its own, it is further complicated by the fact that Congress has never specifically defined the standard, leaving bankruptcy courts to define it at will. Those courts commonly use one of two methods in making a determination of undue hardship. They are the Brunner test, and totality of circumstances, with the first being used most often.
To pass the Brunner test, a debtor must prove three issues. First, that if forced to repay the loan, he or she could not maintain a reasonable standard of living. Second, that certain extenuating circumstances exist which likely will continue for the majority of the loan repayment period. Third, that he or she have made a verifiable good-faith effort to repay the loan. In addition to being able to prove these issues, a debtor must file a, “case within a case” called an adversary proceeding in order to even be able to address student loan discharge.
Adversary proceedings are very complex matters. It is not recommended that a debtor attempt to navigate a student loan discharge on his or her own. The success rate in obtaining a discharge is extremely low, but understanding the process can help.
