1. A Bit Of History on Student Loan Dischargeability

2. 11 U.S.C 523(a)(8) - Today
Except in cases of undue hardship on the debtor, a bankruptcy discharge does not discharge:
Student loan made, insured, or guaranteed by a governmental unit, or made under any program funded by a governmental unit or non-profit.
An obligation to repay funds received as an educational benefit, scholarship, or stipend.
Any other educational loan that is a qualified loan, as defined in section 221(d)(1) of the Tax Code.

3. Student Loan Treatment- History
Student loans were dischargeable as general unsecured loans until 1977
After the Bankruptcy Reform Act Of 1978: Student loans were dischargeable only if the loan first become due more than 5 years prior to the bankruptcy filing OR upon showing an undue hardship.
1984: Excluded deferments & forbearances from 5-year repayment calculation.

4. Student Loan Treatment- History
1990: Repayment requirement increased from 5 years to 7 years.
1991: Statute of limitation on the collection of student loans eliminated; AWG initiated.
1996: Allowed offset of Social Security benefits
1998: Time-in-repayment provision was removed, requiring borrowers to prove undue hardship.

5. Student Loan Treatment- History
2005: Bankruptcy Code amended to extended presumption of non- dischargeability to private student loans.
2006: AWG increased from 10% to 15% of income.
2008: IBR introduced with 15% of discretionary income for 25 years
2010: IBR changed to 10% of discretionary income for 20 years.

6. Undue Hardship – Judicial Interpretation
Brunner Test – Borrower has burden to prove all three prongs (used in most jurisdictions)
The Borrower cannot currently maintain a minimal standard of living;
Additional Circumstances exist that will persist through the life of the repayment period; AND
The Borrower has made a good faith effort to repay the student loans.

7. Undue Hardship – Judicial Interpretation
Totality-of-the-Circumstances Test – the court can consider:
The Borrower’s past, present, and reasonably reliable future resources
The Borrower’s reasonable and necessary living expenses
Any other relevant facts and circumstances
Used in 8th Circuit and some of 1st Circuit

8. Questions ?