NJ Student Loan Forgiveness & the Brunner Test

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A plausible solution for student loan debt is urgently needed as the dollar amount of outstanding college debt approaches $1.4 trillion. That astronomical number means that student loan debt is now second only to mortgage debt in our country.

Currently, money that was borrowed to pay for college is considered nondischargeable in a chapter 7 bankruptcy. This means that, for most people dealing with (what feels like) crushing student loan debt, there is essentially no way to get out from under what may be $50,000 + in debt.

Has the cost of college gotten more expensive?

The cost of four-year college tuition in New Jersey has increased by 41% in the last decade. Additionally, living on campus at a NJ college or university is now nearly 25% more expensive than it was ten years ago. These numbers are even higher for out-of-state students who attend college in New Jersey.

It now costs NJ students an average of $24,000 for ONE YEAR of college tuition, fees, room & board, books & supplies and living expenses.

With that being said, there are proponents of an idealistic plan for two and four year college tuition to be free. Opponents of this utopian plan believe that offering free college won’t fix the problem because the problem ultimately stems from wages being too low.

What other factors have caused the student loan debt crisis?

There is evidence that the largest group of people who’ve defaulted on student loans are those who are earning the lowest income post-college. Data indicates that some of these defaulted borrowers are struggling because they didn’t finish college, and therefore didn’t obtain a degree. This leads to difficulty finding a job that pays enough for them to pay off their loans. Although there are a few student loan repayment programs that are based on earnings, they need serious improvements if they are to make a dent in what is quickly becoming the “student loan crisis.”

Hopefully there will be positive changes coming to the process of paying for a college degree that enable more people to finish college without being bogged down by debt. Until then, the only way to rid yourself of your student loans through bankruptcy is by demonstrating “undue hardship.”

What is undue hardship?

Relating to student loan repayment, the only reason you may be able to discharge your student debt is if repaying your loans would prevent you from being able to do literally anything else, like pay bills, buy food, etc. In New Jersey, the three part Brunner test is used to determine if a debtor demonstrates undue hardship that is significant enough to justify a discharge of student loan debt.

What is the three part Brunner test?

New Jersey bankruptcy court will require you to prove that the three following statements are true as relating to your finances:

  1. You will not be able to maintain even the most minimal standard of living (for yourself and any dependents) if you have to repay your student loans. The answer to this must be based on your current income and expenses.
  2. There is sufficient evidence to prove that #1 (above) will prove to be true for all or most of your student loan repayment time period.
  3. You have made a good faith effort to repay your student loan(s).

Most courts are fairly strict when it comes to the Brunner test, however, if you feel that you honestly would qualify for a hardship ruling in your favor, it is worth discussing the matter with a NJ bankruptcy attorney. As your initial consultation will be free of charge, you have nothing to lose by making a phone call and learning more about your options.

 

Image credit: COD Newsroom

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