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Discharging Student Loans

If you file for bankruptcy in Vermont, or anywhere, are your student loans dischargeable?

As a general rule, student loans are not dischargeable in bankruptcy. The only way you can obtain a discharge of student loans is to show an undue hardship. A hardship discharge requires that you file a proceeding with the court to have the judge determine whether you have suffered an undue hardship. This is generally a difficult standard to meet. A debtor must show that they have a minimal standard of living and its unlikely that they will improve their standard of living over time. There is a test outlined in the case of In Re: Brunner (Brunner v. New York State Higher Education Services Corp.), 831 F.2d 395(2d Cir. 1987). Under Brunner a debtor must prove (a) that his or her current income presently are at a minimal standard and they are unable to pay the student loan (b) that circumstances such as health problems or disability that will cause this state of affairs to persist for a significant portion of the loan repayment and ( c) the debtor has made a good faith effort to repay the loans in the past. It is the debtors burden to prove each of these elements. The local bankruptcy court has elaborated on Brunner in the case of Vezina v. Sally Mae, discussing the burden of proof and the grounds on which the court might find that a debtors salary is unlikely to increase over time.

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