Student Loans

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Once you graduate from the program and start to repay your student loan, the typical repayment plan is of 10 years.  You can attempt to refinance the student loan out to 30 years or request for an income-based repayment plan or income contingent repayment plan.  Certain public service jobs could qualify you for the loan forgiveness, provided you have worked in the public service job for more than 10 years.  To discharge a student loan in bankruptcy, you must file  a separate lawsuit inside the bankruptcy called an “Adversary”.  In a chapter 7 bankruptcy, time period from file date to discharge is about 4 months, during this window you must file an adversary to determine whether the student loan is dischargeable or not. You need not have a final trial before the discharge of other chapter 7 debts, but should file the adversary very soon after the chapter 7 bankruptcy is filed.  In a Chapter 13 bankruptcy, you typically have up to 5 years to pay back certain creditors.  Student loans are treated as credit cards and receive a percentage on the dollar, but are not dischargeable and do survive the bankruptcy.  Student loans are not paid back completely while you are in the chapter 13 bankruptcy, other than the percentage on the dollar that is paid out with the other unsecured debts.  The test to determine whether the student loan is dischargeable in an adversary is known as the “Brunner Test”.

The Bruner Test

Brunner has three prongs: (1) that the debtor cannot maintain a minimal lifestyle if forced to repay the loans; (2) that additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period, and (3) that the debtor has made good faith efforts to repay the loans. This is the standard in Houston, Texas based on In re Gerhardt, 348 F.3d 89 (5th Cir. 2003).

You would apply this test to your facts and judge would decide whether or not the student loan could be discharged.

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