Student loan debt cannot be discharged by most bankruptcy filers. Those people who do discharge student loans must prove that repaying the debt would be an “undue hardship.” Student loans cannot be discharged in the original bankruptcy case. An adversary proceeding must be filed, which is a lawsuit within the bankruptcy court. Adversary proceedings are just like regular lawsuits in federal court. They involve pleadings, motions, discovery, and eventually a trial. These types of legal proceedings are usually decided by the bankruptcy judge rather than a jury.
In order to be successful in discharging student loans, a plaintiff must prove three factors. First, you must prove that you cannot provide a minimal standard of living for yourself and your dependents, based on your current income and expenses, if you are required to pay the student loans. In most adversary proceedings to discharge student loans this is the easiest factor to prove. Second, you must prove that there are additional reasons why the inability to support yourself and your dependents will continue for a significant part of the repayment period of the student loans. Third, you must prove that you made a good faith effort to repay your student loans. Courts will also consider whether the financial impairment existed at the time the debt was incurred.
The case law affecting whether student loan debt can be discharged may be different depending on the state in which you reside. Debtors should consult with an experienced bankruptcy attorney before filing bankruptcy and attempting to discharge student loan debt in an adversary proceeding.