11th Circuit Gives Debtor Another Chance to Prove She Met All Three Prongs of Brunner Test to Discharge Student Loans

11th Circuit Gives Debtor Another Chance to Prove She Met All Three Prongs of Brunner Test to Discharge Student Loans

Chapter 7 Debtor argued that repaying $112,000 in student loan debt would be an undue hardship on her. The Bankruptcy Court agreed with her and granted her a complete discharge of her student loans. The student loan creditor appealed the decision to the U.S. District Court, which reversed the Bankruptcy Court, since it found that the Debtor failed to prove undue hardship.

An individual Debtor may not discharge her student loans through bankruptcy unless she can show that repayment would cause her “undue hardship.” 11 U.S.C. § 523(a)(8). The term “undue hardship” is not defined in the Bankruptcy Code. To guide courts’ analysis, this circuit has adopted the test set out in Brunner v. New York State Higher Educ. Servs. Corp., 831 F.2d 395 (2d Cir. 1987) (the “Brunner test”).  Under the Brunner test, a debtor is entitled to discharge of her student debts if she proves all of the following:

(1) That the debtor cannot maintain, based on current income and living expenses, a “minimal” standard of living for herself and her dependents 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 of the student loans; and

(3) That the debtor has made good faith efforts to repay the loans. Brunner, 831 F.2d at 396.

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