Filing Chapter 13 bankruptcy can help consolidate loan debt, but there are caveats. Where student loan debt is concerned, loans can only be discharged or significantly reduced if a person can demonstrate undue hardship. But what exactly is an undue hardship and how can you prove it?
What is Undue Hardship?
By definition, undue hardship includes “Special or specified circumstances that partially or fully exempt a person from performance of a legal obligation so as to avoid an unreasonable or disproportionate burden or obstacle.”
From the perspective of student loans, this usually requires an individual to pass the Brunner test. This test requires that (1) the debtor cannot maintain the minimal standard of living if forced to repay the student loans he or she owes, and (2) other circumstances indicate the current financial state is expected to persist for a significant portion of the remaining repayment period.
Do You Qualify for Undue Hardship?
Qualifying for undue hardship is an uphill battle, but it is possible for certain individuals. You will have to start by proving you are not meeting the minimal standard of living. This isn’t as simple as calculating your monthly income and qualifying, though. Things to be considered include monthly income, amount of hours worked, living expenses, geographical cost of living, and more. Additionally, you will also have to prove your circumstances likely won’t improve in the future and you have made good faith efforts to repay the existing debt.
Filing for an Undue Hardship Petition
To accurately determine whether or not you meet the requirements for undue hardship, it is best to speak with an attorney. An experienced attorney will be able to point you in the right direction, assist you with the filing process, and help you qualify. For more information, please contact Brock and Stout Attorneys at Law.