Discharge Standard for Student Loans Set for Sixth Circuit

Discharge Standard for Student Loans Set for Sixth Circuit

Description Chapter 7 bankrupt requested discharge of student loans. Bankruptcy Appellate Panel determined that the Sixth Circuit would adopt the Brunner test to cover claims of undue hardship that would permit student loan discharges.

Topic Bankruptcy

Key Words Discharge, Student Loan, Undue Hardship

C A S E S U M M A R Y

Facts After graduating from college, Dolph was obligated to pay $110 per month for ten years. He quit paying after two years. For the next five years, while he had employment problems, he received loan deferments. Then he filed Chapter 7 bankruptcy and sought to have the loans discharged under the hardship exemption.

Court of Appeals Decision The appeals court held that the Sixth Circuit would adopt the Brunner test for deciding when student loans could be discharged. The Brunner test "requires the debtor to demonstrate: (1) that 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) that additional circumstances exist indicating that this state of affairs is likely to persist for a significant period of the repayment period...' and (3) that the debtor has made good faith efforts to repay the loans." The Bankruptcy Appellate Panel remanded the case for the bankruptcy court to determine if Dolph met the test.

Citation In re Dolph, ---B.R.--- (1998 WL 30408, 6^th Cir. BAP)
or
215 B.R. 832 (6th Cir. Bankr. App. Panel, 1998)

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Discharge Standard for Student Loans Set for Sixth Circuit
Description	Chapter 7 bankrupt requested discharge of student loans. Bankruptcy Appellate Panel determined that the Sixth Circuit would adopt the Brunner test to cover claims of undue hardship that would permit student loan discharges.
Topic	Bankruptcy
Key Words	Discharge, Student Loan, Undue Hardship
C A S E S U M M A R Y
Facts	After graduating from college, Dolph was obligated to pay $110 per month for ten years. He quit paying after two years. For the next five years, while he had employment problems, he received loan deferments. Then he filed Chapter 7 bankruptcy and sought to have the loans discharged under the hardship exemption.
Court of Appeals Decision	The appeals court held that the Sixth Circuit would adopt the Brunner test for deciding when student loans could be discharged. The Brunner test "requires the debtor to demonstrate: (1) that 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) that additional circumstances exist indicating that this state of affairs is likely to persist for a significant period of the repayment period...' and (3) that the debtor has made good faith efforts to repay the loans." The Bankruptcy Appellate Panel remanded the case for the bankruptcy court to determine if Dolph met the test.
Citation	In re Dolph, ---B.R.--- (1998 WL 30408, 6^th Cir. BAP) or 215 B.R. 832 (6th Cir. Bankr. App. Panel, 1998)