Brunner Test Explained: Discharge Student Loans in Bankruptcy

You can discharge student loans in bankruptcy. Many people believe otherwise, but it’s possible.

Since late 2022, the Department of Justice and Department of Education released new guidelines. Federal student loan borrowers now have clearer paths to discharge.

Bankruptcy courts treat student debt differently than credit card or medical debt. You must file an adversary proceeding after your Chapter 7 or Chapter 13 case. Courts then determine if repaying your loans causes undue hardship.

The Brunner test measures that hardship.

How the Brunner Test Works

The Brunner test asks three specific questions about your financial situation:

• Can you make student loan payments and maintain a minimal standard of living?
• Will your circumstances continue causing hardship throughout the loan term?
• Have you made good faith efforts to repay your loans?

You must satisfy all three criteria to discharge your student loans.

First Criteria: Minimal Standard of Living

Bankruptcy judges examine your income, expenses, and student loan payment amount. Courts historically lacked standardized guidance for minimal living standards. The 2022 DOJ guidance changed that for federal loans.

Courts may not consider all your expenses essential. Main expenses that count include:

• Housing costs like rent, mortgage, utilities, maintenance, and insurance
• Transportation expenses
• Dependent care costs

You can pull most information from your bankruptcy forms. The Means Test and Schedules I and J contain relevant financial data. You can also explain expenses you consider essential that courts might question.

Courts want proof you’re maximizing income and cutting unnecessary spending. You need to show you’re doing everything possible to maintain minimal living standards.

The DOJ guidance specifically applies to Direct and Direct Consolidation federal loans. You can still use this information when discharging private student loans or other federal loan types.

Second Criteria: Future Inability to Pay

You must prove your inability to pay will continue long-term. Disability preventing work is the most common qualifying circumstance.

Additional circumstances include:

• Being 65 years or older
• Having disabilities or chronic injuries affecting work capacity
• Experiencing unemployment for five years within the past decade
• Unable to pay after being in repayment for 10 years
• Never completing the degree your loan financed

The DOJ and DOE outlined these criteria for federal Direct and Direct Consolidation loans. Private loan borrowers can use these as starting guidelines. You’ll likely need a bankruptcy attorney for private loan cases.

Bankruptcy judges may deny your discharge, grant partial discharge, or approve full discharge. Some judges deny discharge but adjust interest rates or loan terms instead. These adjustments ease repayment burden and provide some debt relief.

Third Criteria: Good Faith Repayment Efforts

You must prove you’ve tried repaying your loans despite financial difficulties. Courts want evidence of genuine effort.

You can demonstrate good faith by showing you:

• Applied for income-based repayment plans
• Made payments toward your balance at some point
• Contacted lenders to discuss hardship and repayment options
• Applied for forbearance or deferment
• Contacted third-party agencies for student loan help

Making good faith efforts doesn’t guarantee discharge. Courts review your case and evidence before deciding.

Private vs. Federal Student Loans

About 93% of student loans are federal loans. Private loans make up 7% but account for $131 billion of total $1.75 trillion student debt.

The Brunner test applies to all student loan types in Chapter 7 or Chapter 13 bankruptcy. The adversary proceeding process starts the same but may differ based on loan type.

Private Student Loan Adversary Proceedings

Private loan adversary proceedings function like civil lawsuits. You’ll have a court hearing with a presiding judge. Two parties argue their cases using evidence.

Federal Student Loan Adversary Proceedings

The 2022 DOJ guidance streamlined federal loan adversary proceedings. Bankruptcy judges now decide whether to hold formal hearings or review recommendations directly.

An Assistant U.S. Attorney reviews your attestation form and recommends to the court. The process is more straightforward for federal borrowers than private loan holders. If you need help determining if you qualify for discharge, you can speak with a bankruptcy attorney for free.

Origin of the Brunner Test

The test takes its name from Brunner v. New York Higher Education Services Corp. Courts use this three-part system to determine undue hardship in student loan bankruptcy discharge.

The Brunner test was historically complicated and confusing. Many elements weren’t defined in the Bankruptcy Code. Different courts interpreted these elements differently.

The undue hardship standard proved difficult to meet. Bankruptcy judges set high bars for approval. These strict standards created the myth that student loan discharge is impossible.

The 2022 DOJ and DOE guidance defines Brunner test terms. Bankruptcy judges now have uniform criteria for assessment. However, this guidance specifically applies to federal student loans. Private loan holders and FFEL loan borrowers face different standards.