Federal law makes it extremely challenging for people to cancel student loans using bankruptcy. Despitemany amendments, Congress never defined undue hardship. As a result, courts needed to develop their own definition. Most courts adopted theBrunner test, which originated from a 1987 case in which Marie Brunner attempted to discharge her student loan debt less than a year after completing a master’s degree.
To stop debtors from rushing to bankruptcy court soon after graduating to wipe away their student debt, the court laid out a three-pronged test to gauge a borrower’s hardship. Under the Brunner Test, Borrowers must prove:
Their current income and expenses prevent them from maintaining a minimal standard of living if they have to repay the debt.
Their financial situation is likely to persist for a significant part of the repayment period, forcing the judge to predict their future.
They made a good-faith effort to pay the loan by trying to increase their income and minimize their expenses.
A handful of other courts, mainly in theEighth Circuit, found the Brunner Test too restrictive and instead adopted the more flexible totality-of-the-circ*mstances test. Under this standard, courts consider a borrower’s:
past, present, and future financial resources
reasonable living expenses
other relevant factors related to bankruptcy proceedings
