For the second month in a row our office was successful at eliminating thousands of dollars of student loans for a bankruptcy debtor. In this recent case, the borrower was 63 years old and was responsible for over $117,000 in parent plus and private student loans for her son. Prior to the bankruptcy, she never made a student loan payment, yet we were able to eliminate all the private student loans and the Department of Education agreed to accept $2,700 for a debt of $31,000.
The Brunner Test
To discharge a student loan under the Brunner Test, a debtor must prove by a preponderance of the evidence that (1) she cannot maintain, based upon current income and expenses, a “minimal” standard of living for herself if forced to repay the loans; (2) that additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period for the student loan; and (3) she has made good faith efforts to repay the loans.
We Never Expected Him to Get Sick
Here, the debtor is a secretary barely making ends meet. She agreed to co-sign for her son’s student loans so he could attend college to be teacher. In the middle of his studies, he became disabled forcing him to drop out of school. The debtor was saddled with massive amounts of student loans left unpaid with no way to pay it back on her secretarial salary. As in most student loan cases the creditors deposed the debtor. One trick question they asked her was “with limited income, how did she ever expect to pay back these student loans?” She answered, “My son and I agreed that he was going to pay for the student loans after he graduated from college and became a teacher. We never expected him to get sick and drop out of school.” After he dropped out, the debtor in good faith stayed in close contact with her lenders and requested and obtained multiple forbearances and deferments. When the last forbearance ended, without making a single payment, the debtor then filed a Chapter 7 bankruptcy and the rest is history.
Prepping Clients for Trial
Not all student loan obligations can be discharged. Each case is unique. Good faith is so important and so is properly prepping the client to be prepared for the tough deposition questions. Based on your client’s special circumstances, he or she may be eligible to discharge student loans. Relief could be in sight! Feel free to have your clients consult with us to see how we may assist them in easing their financial burdens.