by Jesse Langford
A bankruptcy discharges an individual’s debt unless the debt is of such a type that has been specifically designated by Congress as a non-dischargeable debt. The bankruptcy code states that an educational loan is deemed a non-dischargeable debt unless the educational loan would impose an undue hardship for either the debtor or the debtor’s dependents. While the bankruptcy code does not explicitly state what qualifies as an “undue hardship,” courts across the country have done their best to fill in the legislative gaps. Missouri falls in a minority of jurisdictions that use a “totality of the circumstances” test to determine whether a student loan imposes such a hardship. The main inquiry of a bankruptcy court for this purpose is to determine whether the debtor’s future financial resources will allow for any payment of the student loan debt while maintaining a minimal standard of living. If payments can be made while meeting such a minimal standard then the debt is non-dischargeable. The burden will always fall on the individual debtor to prove that they lack the resources to make a payment.
Student loan discharge actions are also complicated by the fact that they require the filing of an adversary proceeding in order for the court to even consider their dischargeability. An adversary proceeding is essentially a lawsuit within your own bankruptcy and these actions can be extremely time consuming and expensive.
Even if your specific financial situation would not allow the discharge of a student loan, a bankruptcy may discharge other types of debt which would ease your financial strain and make ongoing payments of student loans more manageable for your budget.