Student Loan Debt

When repaying a federal or private student loan becomes an "undue hardship," many people consider bankruptcy. Although it is possible to have the student loan debt either fully or partially discharged in a Chapter 7 bankruptcy, the burden of showing an "undue hardship" is high. Students take out loans to pursue an undergraduate or graduate level degree.

The student loan debts that may be discharged in a Chapter 7 bankruptcy include loans for traditional colleges and universities, as well as for-profit colleges. A recent study shows that although for-profit colleges represent only about 13% of the total higher education population, these loans account for about 31% of all student loans and about half of all student loan defaults.

When student loan debt becomes an "undue hardship," a bankruptcy attorney in a Chapter 7 case must file a separate document called a “Complaint to Determine Dischargeability.” During the proceeding in the United States Bankruptcy Court, our attorneys will attempt to show proof of why the Court should grant the petition for a discharge under 11 U.S.C. § 727. While the bankruptcy proceedings are pending but before the adversary proceeding, our attorneys might even be able to help you reach a settlement agreement with the student loan provider.

Our bankruptcy attorneys in Dallas, TX, can help you initiate an adversary proceeding seeking to discharge your student loans under 11 U.S.C. § 523(a)(8). We can represent you from the beginning of a bankruptcy proceeding to the trial. If you can show that a student loan is an undue hardship, the Court can issue a ruling that your student loans are dischargeable under section 523(a)(8).

Bankruptcy Lawyer for Student Loan Debt in Dallas, TX

Student loans are not generally dischargeable in bankruptcy unless paying them would impose an undue hardship on the debtor and the debtor’s dependents under 11 U.S.C. § 523(a)(8). The bankruptcy lawyers in Dallas, TX, at Littlefield Law Firm can help you seek a full or partial discharge of your student and educational loan debt if repaying your student loans would cause you "undue hardship."

Our attorneys can help you include educational debts in the bankruptcy petition and represent you during an adversary hearing to seek the discharge. Although showing sufficient evidence for an undue hardship discharge is not possible in every case, it is possible for some people to discharge their educational debts during a Chapter 7 bankruptcy.

Contact us to discuss what you can do if you have unmanageable educational loan debt. Seek out the services of a bankruptcy attorney in Dallas, TX, at Littlefield Law Firm. 

Call (972) 812-0900.


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Student Loan Debt Information Center


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The "Undue Hardship" Adversary Proceeding for the Student Loan Hold

In order to assert a successful claim to discharge student loans in bankruptcy because repayment would cause "undue hardship," a student loan holder must be able to show the following:

  • a current inability to repay the loans;
  • a future inability to repay the loans; and
  • a good faith effort to repay the loans.

Under this standard, those most likely to gain relief include:

  1. those less likely to be employed;
  2. those more likely to have a medical hardship;
  3. those more likely to have lower annual incomes the year before they filed for bankruptcy.

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Two Options for Gaining Relief from Student Loan Debt

Under the Chapter 13 Bankruptcy, often called "reorganization," a petitioner can keep his or her property, but he or she must partially or fully repay their debts over a period of time. Filing Chapter 13 may provide some short-term relief through suspended or lower payments.

Under the Chapter 7 Bankruptcy, often called "liquidation," the petitioner can seek to have his or her debt completely wiped out, but student loans are an exception to this rule,  unless a petitioner can meet the heavy burden imposed by 11 U.S.C. § 523(a)(8).


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When Repaying Your Student Loans Create an Undue Hardship

Although the U.S. Bankruptcy code does not define the term "undue hardship," the courts have used a variety of factors to decide whether a person qualified for undue hardship relief from debt. 

A court might consider the following facts when deciding whether it is an undue hardship for a petitioner to repay their educational loans:

  • Poverty - if a petitioner cannot pay his or her student loans and still maintain a “minimal” standard of living for him or herself and any dependents, then the petitioner may meet the poverty standard. A court will look at the individual's current income and expenses, the potential for employment and income, education, marketable skills, health, and family support obligations.
  • Persistence - To meet this standard, the petitioner must show that the condition of poverty will continue for the life of the student loan.
  • Good faith - To make a "good faith" showing, you must show your good faith efforts to repay your loans, but that other circumstances out of the petitioner's control have made repayment impossible. The circumstances that make repayment impossible might include an illness, medical condition, or long-term lack of employment options.
  • Policy Considerations - The court will often consider whether the petitioner filed for bankruptcy for reasons other than simply eliminating student loan debt. The court will also consider the financial gains that the petitioner has received or will receive because of the education obtained as a result of such educational loans.

The first three factors are part of the Brunner test used by some courts when deciding whether to discharge student loan debt.


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The Brunner Test for Discharging Student Loan Debt

Many courts have adopted the test announced in Brunner v. New York State Higher Education Services Corp., 831 F.2d 395 (2d Cir. 1987), to determine undue hardship. In many jurisdictions, the Brunner Test provides the definitive authority that bankruptcy courts utilize to determine whether the undue hardship exception applies. To establish undue hardship, a debtor must show:

    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 for student loans; and
    3. that the debtor has made good faith efforts to repay the loans.

The Bankruptcy Code under 11 U.S.C. § 523(a)(8) permits a bankruptcy court to discharge a student loan debt only if the debtor can show that repayment of the loan would cause her an undue hardship. The petitioner has a “heavy burden” during the adversary proceeding seeking discharge of student loan debt.


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The Top Student Loan Creditors in the United States

The largest student loan creditors include the following:

  • College Loan Corporation;
  • Student Loan Xpress;
  • Education Credit Management Corporation;
  • Navient Corp. (formerly Sallie Mae);
  • Nelnet, Inc.;
  • Great Lakes Higher Education Corp. & Affiliates;
  • Citi Student Loans;
  • National Education Loan Network;
  • Brazos Group;
  • Wells Fargo Education Financial Services;
  • Pennsylvania Higher Education Assistance Agency (also known as FedLoan Servicing);
  • Wachovia Education Finance; and
  • JP Morgan Chase Bank.

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Finding a Bankruptcy Attorney for Student Loan Debt in Dallas, TX

We understand that student loans can be discharged under bankruptcy. When appropriate, we can include them in the petition and pursue an adversary hearing to seek a full or partial discharge of the debt. Although showing sufficient evidence for an undue hardship discharge is not possible in every case, it is possible for some people to discharge their educational debts.

If you have unmanageable student loan debt, then seek out the services of a bankruptcy attorney in Dallas, TX, at Littlefield Law Firm. Contact our bankruptcy attorneys in Dallas, TX, to discuss your case. 

Call (972) 812-0900 today.


This article was last updated on Friday, February 16, 2018.

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