What is Considered Undue Hardship for Student Loans in CA?
What is an Undue Hardship? When you file for bankruptcy, you have the opportunity to claim an undue hardship to discharge your student loan debt. The undue hardship test, also known as the Brunner Test, requires the bankruptcy court to look at the totality of the circumstances when determining why you cannot afford to repay your loan. While the court’s analysis may differ from state to state, there are common factors that most courts will evaluate:
Can the student loan borrower afford their living expenses if they must repay the loan?
Are the borrower’s financial issues a long-term or temporary matter?
Has the borrower made reasonable attempts to repay the loan? If the bankruptcy court believes that your financial problems stem solely from a lack of sound decisions, you will not be able to claim an undue hardship. The debtor must make a good faith attempt to repay their loans. To file for an undue hardship, you must file either a Chapter 7 bankruptcy or a Chapter 13 bankruptcy. Once you file for bankruptcy, you must then file a legal action known as an adversary proceeding. An adversary proceeding is a process where the debtor claims that repaying their loans would create a substantial undue hardship for themselves or their family. However, once you file for an adversary proceeding, your loan servicers will be able to dispute your undue hardship claim. This can affect whether the bankruptcy court accepts or rejects the claim. To learn more about filing for an undue hardship, you should continue reading and speak to an experienced California bankruptcy attorney as soon as possible.