Discharging student loans in bankruptcy can be a tricky proposition - but it’s not impossible. though bankruptcy can wipe the majority of debts out and let you start anew, student loans are not on the list of debt that are automatically wiped out in bankruptcy.

Previously, student loans that had been in pay status for at least seven years could be discharged by bankruptcy. This law was changed in 1998.

There are still some ways to have student loans discharged, but it can be a difficult procedure and is subject to several circumstances.

Section 523(a)(8) of the U.S. Bankruptcy Code states that student loans cannot be automatically discharged through either Chapter 7 bankruptcy or Chapter 13 bankruptcy. Also, student loans are not subject to any timeframe that requires the debtor or the creditor to bring the matter before the bankruptcy court. That means if you are bringing an adversary proceeding in bankruptcy court for the discharge of your student loans, you could technically do so at any time.

In order to discharge your student loans you would need to prove that paying the student loan would cause an undue hardship on you and your family. The courts typically expect that repaying the loans would cause some hardship, so undue hardship must be proven.

What constitutes an undue hardship? Different courts interpret this to mean different things, but New York bankruptcy courts typically follow what is called the “Brunner test,” which indicates that undue hardship exists when a debtor is unable to maintain a basic standard of living while repaying the debt - and that the debtor’s financial situation is likely to exist for the rest of his or her life.

In some cases, waiting for a year or more after the bankruptcy before asking the courts to discharge the student loans may be wise. After a while, your credit report after bankruptcy may show your continued inability to pay the debt.

Even if you decide to bring an adversary proceeding to have the student loan discharged in bankruptcy, you should expect to have this request vigorously contested by the creditors. This can drag out the bankruptcy proceedings, leaving you in an uncertain situation for a long time as the case winds its way through the court system. It’s always wise to consult your attorney to determine what path to take.

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