A debtor seeking a COURT ORDER that his/her student loans are dischargeable bears the burden of proving that repayment of the loan will impose an undue hardship.
To obtain this court order the debtor must file a bankruptcy case AND a separate lawsuit (known as an adversary proceeding) within the bankruptcy case to secure the discharge. There are separate fees for these two proceedings.
“Undue hardship” is not defined in the Bankruptcy Code, so courts have devised their own methods for determining what undue hardship means. Our circuit, the 8th Circuit, has developed a “totality of circumstances” test, which reviews the following:
1. The Debtor’s past, present, and reasonably reliable future financial resources.
2. The Debtor’s reasonable and necessary living expenses.
3. Any other relevant facts and circumstances.
If the Debtor’s reasonable future financial resources will sufficiently cover payment of the student loan debt – while still allowing for a minimal standard of living – then the debt will NOT be discharged.