For most people, there is no way to get out from under student loans. The government does not allow most student loans to be eliminated by a bankruptcy, except in very rare cases. Only a very small percentage of student debt is ever discharged, and in order to achieve this outcome, a person has to pass what is called the Brunner Test.
Brunner vs. New York State
The Brunner Test was the result of a 1987 lawsuit called Brunner vs. New York State Higher Education Services Corp. In this suit, a woman named Marie Brunner was originally relieved of her student loans, only to later have the decision reversed because it was decided that she did not suffer any undue hardship worthy of being excused from her student loans.
Out of that case, it became clear that the courts needed a way to accurately determine what really constitutes undue hardship. Therefore, they developed the Brunner Test, which has three requirements, or prongs. If a person meets all three requirements, they could have their student loan debt discharged. However, there is still a lot left to the interpretation of the judge.
Brunner Test Prongs
The three prongs of the Brunner Test are:
- You must not be able to maintain a minimal standard of living, for either yourself or your dependents. For many people, this prong convinces them not to ever attempt a student loan debt discharge; who wants to admit in a public court of law that they are unable to provide even the most basic standards of living for their children, for example?
Usually this prong is satisfied if your income allows you to qualify for food stamps, if you have few or no assets (i.e. no house, no car), if you live in a rent-free location (such as with your parents) because you cannot afford rent, you have been unable to work because of a disability, or you can prove that while attempting to live very frugally, you still had higher expenses than income.
- You must be able to show that your financial situation isn’t likely to improve or change in the future. For most people, this is the prong that gets their case dismissed. Courts reason that anyone of sound body and/or mind will be able to eventually find employment.
The few cases that typically do pass this prong are those in which the debtor is disabled or in some way unable to work. In some cases, this prong can be satisfied if a spouse or parent became so ill that you had to quit your job to care for them full time.
- You must have made a good faith effort to repay the loans in the past. If you’ve never made a single payment on your loans, or attempted to set up a new payment plan with the creditor, then it isn’t likely your bankruptcy will be awarded. This prong is usually the easiest to pass, because it isn’t left to interpretation. If you haven’t attempted to get a forbearance or a new payment plan in the past, you won’t pass this prong.
It’s very difficult to say whether a bankruptcy case in NYC will pass the three prongs. It largely depends on the judge’s interpretation of the situation and the Brunner Test. One judge may rule one way, while the judge just down the hall might rule a totally different way.
If you believe that your student loan debt could be discharged through an NYC bankruptcy, you’ll need an experienced lawyer on your side. Contact my office at 212-244-2882 to learn how to get started.