It has been said that it is impossible to discharge a student loan in bankruptcy. While indeed
it is a very difficult debt to discharge, it is not
impossible. In fact, one collector had been found liable
Fair Debt Collection Practices Act for representing to a
consumer, while collecting a student loan, that the loan was not
eligible for discharged in bankruptcy. See Easterling
v. Collecto, Inc., 692 F.3d 229 (2d Cir. 2012).
While discharging a student loan may be a very difficult
proposition, it is not impossible, and the loans are not ineligible
for discharge. According to the bankruptcy code, a student
loan debt is considered non-dischargeable unless excepting it from
discharge “would impose undue hardship on the debtor and the
debtor’s dependents.” 11 U.S.C. §523(a)(8). Naturally,
there are a multitude of consumers out there that can fairly claim
that paying off their student loans is causing an undue hardship on
them and their families. However, the test for what
makes an “undue hardship” is where it gets
difficult. There are several factors that are considered:
Debtor must show that he or she cannot maintain, based on
current income and expenses, a minimal standard of living for the
debtor and the debtor’s dependents if forced to repay the
Elements of a minimal standard of living consist of decent shelter
and utilities, food and personal products, maintenance of vehicles,
health insurance, and the ability to pay for medical or dental
services should the need arise. A person should be
entitled to these basic necessities. If repaying the student
loans prevents the debtor from being able to have these, then this
would weigh in favor of discharge. But that is not all.
Debtor must show additional circumstances exist indicating
that this state of affairs is likely to persist for a significant
portion of the repayment period of the loans.
In this, the debtor must essentially show that they are hopeless,
and this is certain for the foreseeable future. Factors to
consider are whether the debtor’s earning capacity has peaked, or
their earning capacity has diminished on a somewhat permanent
basis, age of children, age of the debtor, and evidence of mental
or physical impairments. Moreover, the length of time
considered in the future is not perpetual, its for a significant
portion of the original repayment period.
Debtor must show he or she have made good faith efforts to
repay the loans.
In this, there is not too much guidance. Essentially, a
debtor has to show that the obligation has not been avoided
altogether – that some efforts have been made in the past to keep
current with the obligation, but that the debtor is no longer able
to keep paying and maintain a minimal standard of
There are other hardship standards that have been considered by
bankruptcy courts. For instance, one court used a “totality
of circumstances” test wherein it considered (1) the debtor’s past,
current, and reasonably reliable future financial resources; (2)
the debtor’s and his dependent’s reasonably necessary living
expenses; and (3) any other relevant facts and
Thus, discharging student loans can be done. The courts
can be very tough on debtors who try, but it is possible.
Therefore, don’t believe the debt collectors of these loans when
they tell you the debt can never go away.
SmithMarco, P.C. has been protecting consumer rights since 2005.
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