Student Loans In Bankruptcy in the Second Circuit
By Nancy Delain
In general, a loan that finances your or your dependent's tuition, room, board, and books cannot be discharged in bankruptcy.
However, the various circuit courts have carved out exceptions to that general rule based on the idea of "undue hardship" that is found in the Bankruptcy Code. It IS possible to discharge your student loan debt in the Second Circuit (New York, part of Connecticut and Vermont) IF you meet the three-part test that the Second Circuit Court of Appeals published: "(1) ... the debtor cannot maintain, based on current income and expenses, a "minimal" standard of living for herself and her dependents if forced to repay the loans; (2) ... additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period of the student loans; and (3) ... the debtor has made good faith efforts to repay the loans." In re Brunner, 831 F2d 395ff (CA2 1987).
It is important that a debtor meet ALL THREE of these factors if s/he wishes to achieve a discharge of student loans through bankruptcy.