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Knowing the tests used to discharge student loans can be helpful

On Behalf of | Feb 5, 2022 | Chapter 7 Bankruptcy |

Handling several bills at the same time can become challenging. If you have debts piling up in Arkansas or Tennessee, you may want to consider filing bankruptcy. Learning more about the process is essential if you have student loans that you’d like to have discharged. Unlike medical bills and credit cards, discharging student loans fall into a unique category that includes other rules.

Can you discharge student loans using bankruptcy?

Filing Chapter 7 bankruptcy is usually the first option to take if you want to discharge your student loans and other debts. This type of bankruptcy erases all of your existing debt and stays on your credit report for 10 years. However, going this route will require you to prove “undue hardship” if you want to include student loan payments. In addition, this option typically requires you to pass the Brunner Test. This test requires you to prove the following:

– Making student loan payments wouldn’t allow you to maintain a basic living standard.
– Your financial hardship is expected to last for an extended amount of time.
– Before filing for bankruptcy, you made a “good faith” effort to repay your student loans.

Proving these circumstances will likely be challenging as the Brunner Test can be somewhat subjective from jurisdiction to jurisdiction. This may lead to different standards depending on who oversees your case.

Alternative to the Brunner Test

If you’re a resident of Arkansas, which is in the Eighth Circuit court system, it may be easier for you to get your student loans discharged. The courts in the Eighth Circuit rely on the “totality of circumstances” test to determine your overall financial situation. The criteria used is less restrictive than the Brunner Test, providing you with better odds of getting your student loans discharged.

Reorganizing your student loan payments and other debts using a Chapter 13 bankruptcy may also be an option. Learning more about the criteria available in your area will help you know if discharging your student loan payments is possible.