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Student Loan - Bankruptcy

Certain student loans are not discharged in bankruptcy unless the debtor files an adversary proceeding and proves that the loans "impose an undue hardship on the debtor and the debtor’s dependents." 11 USC 523(a)(8). See Krieger v. Educ. Credit Mgmt. Corp., 2013 U.S. App. LEXIS 7202 (7th Cir. Apr. 10, 2013) (upholding discharge of student loans under "undue hardship" standard).

Table of contents for this topic:


Types of loans protected

Non-payment of tuition is a "student loan" only if (a) funds have changed hands or (2) there is a separate agreement deferring payment. A mere failure to pay when due is not a student loan. In re Chambers, 348 F.3d 650 (7th Cir. 2003).

Undue hardship

Brunner test

Under the Brunner test the debtor must show (i) based on current income and expenses, he cannot maintain a minimal standard of living if required to repay student loan debts, (ii) this state of affairs will persist for a significant portion of the repayment period, and (iii) good faith repayment efforts were made in the past. Brunner v. N.Y. State Higher Educ. Servs. Corp., 831 F.2d 395, 396 (2d Cir. 1987)

Circuits adopting

  • 2nd Circuit. Brunner v. N.Y. State Higher Educ. Servs. Corp., 831 F.2d 395 (2d Cir. 1987)
  • 3rd Circuit. In re Faish, 72 F.3d 298 (3d Cir. 1995)
  • 4th Circuit. In re Mosko, 515 F.3d 319 (4th Cir. 2008)
  • 5th Circuit. In re Gerhardt, 348 F.3d 89 (5th Cir. 2003)
  • 6th Circuit. See Oyler v. Educ.Credit Mgmt. Corp., 397 F.3d 382, 385 (6th Cir. 2005)
  • 7th Circuit. In re Roberson, 999 F.2d 1132 (7th Cir. 1993)
  • 9th Circuit. In re Craig, 579 F.3d 1040 (9th Cir. 2009)
  • 10th Circuit. Educ. Credit Mgmt. Corp. v. Polleys, 356 F.3d 1302 (10th Cir. 2004)
  • 11th Circuit. In re Cox, 338 F.3d 1238 (11th Cir. 2003)

Totality of the circumstances test

Educational Credit Management Corp. v. Jesperson, 571 F.3d 775, 779 (8th Cir. 2009), explains:

Reviewing courts must consider the debtor’s past, present, and reasonably reliable future financial resources, the debtor’s reasonable and necessary living expenses, and “any other relevant facts and circumstances.” Long, 322 F.3d at 554. The debtor has the burden of proving undue hardship by a preponderance of the evidence. The burden is rigorous. “Simply put, if the debtor’s reasonable future financial resources will sufficiently cover payment of the student loan debt - while still allowing for a minimal standard of living - then the debt should not be discharged.” Id. at 554-55.

Circuits adopting


Debtor must file an adversary proceeding seeking a determination that repaying the loan would be an undue hardship. Bankruptcy Rule 7001(6).

Eligibility for future loans

The anti-discrimination provisions of 11 USC 525(c) protect eligibility for federal student loans after a bankruptcy filing. However, those protections do not extend to PLUS or private loans.

See also

External links

Topic revision: r14 - 15 Apr 2013, RobertEddington
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