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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1 Comment

  1. Eugene Wedoff

    It’s important to note that the 11th Circuit’s decision rejected the district court’s holding that the debtor’s wisdom in incurring her student loans was an appropriate consideration in determining her future ability to pay the loans. The decision states: “[T]he second prong is a forward-looking test . . . .. It does not look backward to assess blame for the student debtor’s financial circumstances. Thus, even if the court concludes that a debtor has acted recklessly or foolishly in accumulating her student debt, that does not play into an analysis under the second prong.” The decision does state, in a footnote, that “in an extreme case” excessive educational borrowing might bear on the debtor’s good faith, but it makes no ruling on that possibility.


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