Under the Brunner “undue hardship” test it is extremely difficult to cancel student loan debt in bankruptcy. Some courts are beginning to relax this test, as we can see from a recent U.S. District Court decision from Kansas.
This court instructs that the unique facts and circumstances of each case must be examined to provide a fresh start to bankruptcy debtors; and that the test should not be applied too restrictively.
In the Kansas case the bankrupts had made the loan payments for 20 years, and continued to make IBR (Income Based Repayment) installment payments. However, the IBR installments did not even cover the loan interest, and the debtors would not be able to maintain a minimal standard of living if required to pay the student loan according to its terms.
The court found that the debtors demonstrated their good faith by first making the regular loan payments, and then participating in the IBR program, and ruled in favor of the debtors.
The Law Offices Of Todd S. Frankenthal handles student loan cases in the Miami, Fort Lauderdale, and West Palm Beach divisions of the United States Bankruptcy Court For The Southern District Of Florida.