Student loans are not dischargeable in Chapter 7 or Chapter 13 bankruptcy, except in narrowly defined circumstances. A debtor must establish that continued payment of the student loan debt would cause “undue hardship” to them and their dependents. 11 U.S.C. § 523(a)(8). Most U.S. jurisdictions apply a three-part test to determine whether a debtor has met this burden. A student loan debtor is currently appealing the denial of discharge in a Chapter 7 case to the U.S. Supreme Court, arguing in part that the three-part test is improper, or alternatively that it should be modified. Tetzlaff v. Educ. Credit Mgt. Corp. (“Tetzlaff Petition”), No. 15-485, pet. for writ of cert. (Sup. Ct., Oct. 15, 2015).
Most federal appellate courts, including the Ninth Circuit, have adopted the Brunner test to determine whether a student loan debtor has met the statutory requirement of proving “undue hardship.” A debtor must prove, by a preponderance of evidence, that:
1. Based on their current levels of income and expense, repayment of the loans would prevent them from supporting themselves or their dependents at a “minimal standard of living”;
2. This situation is likely to continue for most or all of the repayment period; and
3. They have “made good faith efforts” to make timely payments on the debt. Brunner v. N.Y. State Higher Educ. Svcs. Corp., 831 F.2d 395, 396 (2d Cir. 1987).