Discharging Student Loans in Bankruptcy in Arizona
The overall impression of bankruptcy has always been that student loans were not eligible for discharge. The impression is no longer a valid statement. Keep in mind that it is possible to discharge student loan debt in bankruptcy, but it is tough to do. To ensure that you are following all the rules of bankruptcy, you will want to hire an Arizona bankruptcy lawyer to handle your case.
The Brunner Test
You and your bankruptcy lawyer will be tasked with proving that the repayment of your student loans will cause you undue hardship. The test that is widely used in bankruptcy courts to define undue hardship is the Brunner Test. The Brunner Test comes from a bankruptcy case in the 1980s when a borrower (Brunner) tried to discharge federal student loan debt through a bankruptcy discharge.
The problem with the Brunner Test is its subjectivity. The judge handling the bankruptcy case is the one who decides if you meet the criteria of the Brunner Test. One judge may believe that repaying your loans causes you undue hardship. At the same time, another may deny the discharge of the loans. The best way to prepare for the potential outcome is for you and your lawyer to study up on old bankruptcy cases the judge has handled and see if the Brunner Test was admissible.
Meeting the Brunner Test
Since the Brunner Test is subjective, it will be worth preparing for it regardless of the judge you receive for your case. There are specific criteria that you should focus on with your lawyer when preparing for the test. The Brunner Test will evaluate several different factors to determine if your student loans will cause undue hardship if you have to pay them back.
Would you be able to maintain a minimal standard of living if you were required to repay the student loans?
The judge wants to know what your life would be like if you have to repay these loans. They want to see if you can maintain a minimum standard or if you would be homeless or in hardship with the payment you would have to make.
Are the financial difficulties you are facing temporary, or are they expected to impact your life for several years?
It is likely you won’t have a set time frame for the amount of time that you will have financial hardship. The judge wants to know if paying these student loans are going to add additional hardship that will lengthen the amount of time you experience it.
Did you make an effort to keep your payments up before you filed for bankruptcy?
The judge wants to know if you attempted to pay on these loans before you filed for bankruptcy. They want to know if you put forth reasonable effort before trying to write them completely off.
Bankruptcy courts dismissing student loan debt is a rare occurrence. Your bankruptcy lawyer will advise you of this in the beginning. Those who are more likely to qualify are those who are over the age of 50, have disabilities, or are facing a financial difficulty that will not improve with the loans present.
Your Arizona Bankruptcy Lawyer
When you hire a bankruptcy lawyer in Arizona, they will be able to advise you on the items you can have discharged in a Chapter 7 bankruptcy. The lawyer will take a look at your financial situation, as well as your future financial situation, and see if preparing for the Brunner Test is logical. You should not try to face your Arizona bankruptcy alone. Hire an Arizona bankruptcy lawyer that can help you with your bankruptcy case today.