Can Bankruptcy

Student loans are non dischargeable, generally. To discharge a student loan obligation through bankruptcy you must file a complaint requesting that your government-owned student loans be discharged pursuant to section Bankruptcy Code Section 523(a)(8). The standard for the Court to determine your student loan obligation discharged was set in the case Brunner v. New York State Higher Education Services Corp. in 1987. This means you need to satisfy the so-called "Brunner Test" and the court is to consider: (1) you current level of income and expenses, and determine whether you can maintain a minimal standard of living for you and your dependents if you are required to repay the loans; (2) whether there are additional circumstances suggesting that your current financial condition is likely to continue for a significant portion of the repayment period; and (3) whether you have made a good faith attempt to repay the loans.

The "Bruner Test" is a very high standard and basically, unless you care for or are suffering from a disability that will continue for your lifetime, that prevents you for earning sufficient income to support you and your family and you have made a good faith effort to repay your loans, you will be unable to discharge your loan debts through a bankruptcy.

Testimony in the Con¬gress hearings in 1998 intended undue hardship claims to be considered in light of "the availability of various options to increase the affordability of student loan debt, including deferment, for¬bearance, cancellation and extended, graduated, income-contingent and income-sensitive repayment options." H.Rep. No. 750, 105th Cong. 2d Sess. 408 (1998).

There are other options to consider on your student loans. One such option is through the United States Department of Education, William D. Ford Federal Direct Loan Program ("Direct Loan"), offers various repayment options for student loan debtors. One of these is the Income Contingent Repayment Plan (the "ICR" plan). Essentially, once a loan debtor is on an ICR plan, monthly payments are calculated on the basis of adjusted gross income, family size, and total amount of Direct Loan debt. This can give student loan debtors the flexibility and breathing room they need during difficult times. The maximum repayment period under an ICR plan is twenty-five years. Direct Loan provides a handy calculator for ap¬proximating ICR plan pay-ments.