In most cases, you cannot discharge a student loan. Although the subject is more complicated in some instances than can be covered in a blog post, there are cases where the debtor can discharge a student loan. A discharge of a student loan can be ordered by the United States Bankruptcy Court, or it can be determined administratively by the Department of Education. Every debtor considering this issue should first check the following webpage published by the U.S. Department of Education to provide a summary of the cases where an administrative discharge ( meaning outside of Court action) can occur: US Dept Ed website.
The Debtor can choose to have the bankruptcy court determine if the debtor qualifies for a discharge of the student loan by filing an adversary case against the U.S. Department of Education, and, if the loan was incurred sometime before 2009, the lender/servicing company who is the creditor on the account. The United States Department of Education and the United States Attorney General in your bankruptcy district must be served notice of the Adversary Complaint. The Court must consider the following factors in deciding whether a student loan can be discharged as an "undue hardship:"
(1) 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) additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period of the student loans; and (3) the debtor has made good faith efforts to repay the loans.
The loan can be discharged in whole or in part if the bankruptcy court determines that there is an "undue hardship," with consideration of the foregoing factors. The Debtor can present testimony of a medical professional and medical records to support the claim of disability, and financial information about the debtor's household to show that the disability directly and adversely affects the debtor's ability to maintain a lifestyle above poverty level. The determination by the Court is fact sensitive and decisions can vary from case to case.