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Redefining undue hardship to include student loans

Individuals filing for bankruptcy in Ohio may be able to discharge some of their debt if it is deemed an undue hardship. Traditionally, it has been difficult for students to get their student loan debt classified as an undue hardship, so many have not been able to get it discharged when they filed for bankruptcy.

Congressman Peter DeFazio wants to change that. He introduced proposed legislation that would expand the definition of undue hardship to include some forms of student loan debt. Congress, as of this date, has not defined what undue hardship means. Judges who hear bankruptcy cases decide what undue hardship means on a case-by-case basis.

The legislation proposed by Congressman DeFazio may be bolstered by the momentum that is building to include student loans into the definition of undue hardship. Earlier in 2018, the Department of Education began collecting data and feedback from the public with the goal of determining if it was necessary to modify how student loans were evaluated during the bankruptcy process. The Department of Education had concerns that the undue hardship standard as it is currently used in the courts may discourage individuals who would benefit from filing for bankruptcy.

Most courts currently use what is known as the Bruner test to define undue hardship. This test attempts to determine if an individual would be able to maintain a minimum standard of living if they had to repay a loan, if the financial difficulties they are facing are temporary or if they will continue for some time, and if the individual attempted to keep up with their loan payments prior to filing for bankruptcy.

Student loan debt has forced many to consider filing for bankruptcy. Chapter 7 bankruptcy lawyers may work with their clients to review debts and assets and then determine if bankruptcy is a good course of action. Lawyers may also help their clients determine a filing date.

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