College students and graduates can end up bankrupt without ever having made money. Yes, it’s true, and student loans are some of the biggest contributors. Most private colleges now require students to pay $10,000 a year or more in tuition, and state colleges aren’t much cheaper.
As recently as February 2013, Chicago Tribune reporter Anya Kamenetz and other media representatives were using their columns to express concern about student loan debt. Fortunately, there is good news for students with debt. Kamenetz found that in as many as “4 out of 10 cases, [judges] erased part or all of [student loan debt]” if the student filed for bankruptcy.
Kamenetz reports that students can get their loans forgiven through bankruptcy if they file an “adversary proceeding… a mini-trial in a bankruptcy case.” In an adversary proceeding, the college is seen as an entity that caused or aggravated the claimant’s debt. This transfers fault from the student. However, Kamenetz notes that to be completely forgiven, the student loan situation must pass a Brunner test. The Brunner test consists of three parts:
- Proof of “undue hardship” – that as Kamenetz writes, “you cannot maintain a standard of living… while making loan payments.”
- Proof that the situation will continue.
- Proof that the student has made a reasonable effort to repay loans.
If you are a student who passes the Brunner test, all your loans can be written off as part of bankruptcy. A bankruptcy attorney can help you determine which bankruptcy path is best for you. Under bankruptcy, you can also be protected from wage garnishment in any current job.