Court rules against student loan discharge
Many people struggle to pay their debts and living expenses each month because of health issues. Missing days at work can mean a much smaller paycheck for those who do not have sick leave. In some cases, filing bankruptcy may be the answer to lowering the number of bills coming in so that a person can afford living expenses.
However, filing bankruptcy is not likely to eliminate student loan payments, according to a recent court ruling.
The Brunner test defines hardship
There is an undue hardship test known as the Brunner test which identifies whether the court may discharge student loans. To “pass” the test, a person must prove that repaying the student loans would keep him or her from achieving a minimal standard of living, that this financial situation is likely to continue during the repayment period and that he or she has tried to repay the student loans with a good faith effort before resorting to bankruptcy.
Health problems may cause hardship
The woman whose case the bankruptcy court denied suffered from diabetic neuropathy and was no longer able to work at jobs requiring her to stand. Three companies hired her, and she subsequently lost those jobs because of her physical challenges. She was receiving public assistance at the time she filed bankruptcy and sought discharge for her student loans.
Court rules woman may find suitable employment
The court noted that the woman could work at a sedentary job and that she was hirable based on her success at attaining three jobs in one year, even though she did not keep them. Further, according to the court, the fact that Congress is considering legislation options that would make student loans dischargeable implies that the courts cannot currently discharge them under the present circumstances.
Bankruptcy may benefit student loan borrowers
If proposed legislation does succeed, bankruptcy courts are likely to see a large influx of filers seeking to discharge student loans. Right now, the primary benefit a person with student loans may achieve is relief from other debts that frees up income to make student loan payments.