Since 1977, certain kinds of student loan debt have been difficult to discharge without showing “undue hardship.” The 9th Circuit ruled in 1998 that it would adopt a particular test used in the 2nd Circuit to determine whether undue hardship existed. In his Bloomberg BNA article “Student Loan Debt Dischargeability – Courts Discuss Limits of Brunner Test,” Steven Werth examines the problems with the Brunner Test, which is the most restrictive test used in any Circuit for determining whether student loan debts are dischargeable.
Some courts assert that the Brunner Test restricts a bankruptcy court’s discretion to classify student loan debt as an undue hardship. Because the test may not take into account many important factors involved in a specific case, Mr. Werth believes an argument can be made that the Test’s three main factors should be modified or re-interpreted in a situation where, if a slightly different test could be used, a debtor would be entitled to a discharge.
A totality of the circumstances approach is used in the Eighth and First Circuits, and Mr. Werth discusses the implications of arguing to courts in the Ninth Circuit that the totality of the circumstances approach, or some other approach, should be used instead of the Brunner Test.