There are more Americans with student debt than there are people in many countries. According to the Consumer Financial Protection Bureau, there are more than 40 million Americans dealing with student loans, amounting to more than $1.2 trillion in amassed debt. On top of that, of those 40 million borrowers, seven million have defaulted and damaged their credit as a result. This bad credit could prevent them from buying houses and cars, starting a family and even getting a job.

While the detriments of accumulating student debt are well-documented, the impact that filing for bankruptcy could potentially have on your student loans is generally unknown. It’s very difficult for a person to have student debt wiped out through bankruptcy, but not completely impossible.

In order to have your student loans forgiven, discharged or cancelled, you and your bankruptcy attorney must prove to the court that re-paying your debt would cause you and your dependents undue economic hardship. Since bankruptcy courts are reluctant to discharge student debt, you will have to present a strong case.

The Brunner Test

One test that many courts use to determine if a person’s economic hardship would make them eligible for debt discharge is the Brunner Test. Using this model, the bankruptcy court assesses three factors in making its determination:

Poverty: Based on the current income, can the debtor maintain a minimum standard of living for themselves and any dependants during the duration of the debt repayment plan?

Persistence: How long is this period of economic hardship expected to last? Will it last throughout the duration or for a majority of the debt repayment period?

Good faith: Has there been an honest effort on the part of the debtor to repay the debts? This is generally judged over an extended period of time.

There are other tests which courts use, but they essentially boil down to the same things: Can you afford to pay? Can you maintain a minimum standard of living? How long is your current hardship expected to last?

Getting your debts wiped-out through Chapter 7 filing is not the only bankruptcy route to help with student loans. By choosing a Chapter 13 filing, you may be able to secure a favorable five-year repayment plan to help you get your financial situation straightened out. Be aware, however, after your bankruptcy repayment plan has ended, you’ll still be on the hook for the rest of your student loans.

Even if you are not successful in discharging your student loans completely you may still have a favorable outcome if you file an adversary proceeding. Statistically, when an adversary proceeding is filed the student loan provider is more likely to offer the borrower a reduction in the amount owed or to lower the payments to make them more affordable even if the loans aren't completely wiped out.