Are my student loans dischargeable in bankruptcy?
Discharging student loans through bankruptcy is not impossible in Pennsylvania and is worth considering. Because the circumstances of each case vary, it is best to consult with an experienced bankruptcy attorney at Melaragno, Placidi & Parini right away. We can talk about your income and financial goals to determine a course of action to suit your situation. Pennsylvania has some of the highest student loan debt per capita –debt that is higher that the national average.
In general, student loans are considered to be non-dischargeable and cannot be wiped out by filing for bankruptcy, no matter what Chapter (Chapter 7 or Chapter 13) is chosen. There are some circumstances where it is possible to wipe out a student loan debt, but there are three financial elements that have to be proven for that to happen.
The test a student loan debtor must satisfy is referred to as the Brunner Test, arising from a landmark court case, Brunner v. New York State Higher Educ. Servs. Corp. In order for a student debtor to have their student loans wiped out they must meet the following criteria:
- Based on the individuals current income and expenses, the debtor cannot meet a nominal standard of living for themselves or any dependents.
- Circumstances indicate this situation is likely to be the case for a significant portion of the repayment period.
- The debtor has made a “good faith” effort to repay the loans.
If all three of the criteria are met, it may be possible to wipe out student loans. However, this is not something a debtor should try on their own. It is far too complex to tackle without the legal knowledgeable and experience a bankruptcy attorney has acquired over the years of helping clients with their bankruptcies.
Another option exists to wipe out student loan debt. This method is known as the “closed school discharge.” This remedy may be available if the debtor incurred the student loan after January 1, 1986 and was enrolled at a school for 90 days before the school shut down. The debtor’s last day of school must have happened within 90 days of the school’s actual closing date.