How to Prove Undue Hardship for Student Loans

Proving undue hardship for student loans is something that comes up only if you file for bankruptcy. But this should only be considered as a last resort. Filing for bankruptcy is complicated and time-consuming and it will have a damaging effect on your credit. You will most likely have to hire a bankruptcy lawyer because of all the legalities involved. And even then, the court will only allow you to discharge your loans in bankruptcy if you can prove undue hardship. 

For most students considering this option, the big question is how to prove undue hardship for student loans.   

What Is Undue Hardship On Student Loans? 

Undue hardship refers to a situation in which the borrower’s and their dependent’s well-being may be severely compromised if they continue making payments on their student loans. This typically happens when the borrower’s finances are severely limited and they just don’t have the funds for both obligations. The only solution then is to discharge their student loans through bankruptcy. 

This is not a pleasant situation for the borrower or the lender. Filing bankruptcy costs the borrower high in terms of time, effort, and damaged credit. For the lender, it means giving up any hopes of getting their money back. 

Proving undue hardship was a clause introduced by the legal system in an effort to be fair to both parties. Because the definition of hardship can vary from one person to another, the courts use very specific parameters to determine whether or not undue hardship applies and if the borrower can file bankruptcy. 

How To Prove Undue Hardship For Student Loans

Most (not all) courts use the Brunner Test to assess undue hardship. Even if a court does not use this specific test, they will use almost similar criteria to evaluate undue hardship. 

These are some of the main factors that a court will assess to determine undue hardship: 

  • Your present ability to pay: Can you maintain a minimum standard of living if you’re forced to continue making loan repayments?
  • Your future ability to pay: Are your financial issues temporary or are they likely to be ongoing for several years? 
  • Good faith effort to repay: Have you exhausted all options to keep up with your loan repayments before filing for bankruptcy? 

The ‘good faith’ argument involves wanting to see proof that you’ve truly made every effort to pay back your loans but failed. You will need to submit supporting documents to show the different ways you’ve tried to raise funds to repay your loans. This is to prevent borrowers from using bankruptcy as an easy way to get out of paying their loans. 

In weighing your case, the court will also consider a few other factors including: 

  • Age
  • Just history
  • Current employment and income
  • How long you’ve been paying your loans and your payment history 
  • Health
  • Mitigating personal circumstances such as caring for a sick family member
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Is It Easy To Get Approved For Undue Hardship & Bankruptcy? 

No, it isn’t easy to get approved for undue hardship and bankruptcy. The laws surrounding these issues are exceedingly stringent to deter student borrowers from misusing the system. This has contributed to the common misconception that student loans cannot be discharged through bankruptcy. The truth is student loans can be discharged but it isn’t easy.

The court will exhaust all the available options before agreeing to eliminate your student loan debt. If you have federal loans, they will ask you to enroll in an income-driven repayment plan to lower your monthly repayments and make them more affordable. They may also recommend requesting deferment or forbearance before discharging your loans. 

The court may consider your request for discharge only if you can show that you’ve tried every option but none of them worked for some reason or the other. And even then, the court may decide to discharge only part of your student loan debt and not the full outstanding amount. 

Before You Consider Filing Bankruptcy, Consider These Options

As we said earlier, you should consider filing for bankruptcy only as the very last resort. Getting your outstanding loans discharged only trades one problem for another. Before you go this route, there are several other options you can look into to make your loan payments more affordable. 

If you have federal student loans, enroll in one of the income-driven repayment plans. Depending on your current income and the plan you choose, your loan payment could even come down to zero. This will give you a chance to build up your resources without compromising your family’s well-being. 

Are you in a career that qualified for forgiveness? Look into the federal loan forgiveness programs to determine if you qualify. That may help to reduce or even wipe out your student loan debt.

Consider refinancing your loans to extend the loan term. This will automatically lower your monthly payments and make them more affordable. Refinancing is a particularly good solution if you have a good credit score or if you can get a cosigner with a good credit score. 

Request a deferment or forbearance on your loans. Both work differently but in both cases, your loan payments will be put on hold giving you a chance to build up your resources. 

Last but not least, speak to your lender. Any lender would be happy to work with you to find a solution that works for both parties rather than have to deal with bankruptcy. 

Use our Student Loan Finder tool to quickly and quickly find and compare loans from reputed lenders.

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