If I File Bankruptcy in Atlanta, Georgia, Do I Have to Repay my Student Loans?

If you file bankruptcy in Atlanta, Georgia, you will most likely have to repay your student loans. This is true whether you file Chapter 13 bankruptcy or Chapter 7 bankruptcy, since Federal bankruptcy law is clear that most student loan repayment obligations are not dischargeable. However, there are a very small number of circumstances where student loans will not have to be repaid after filing bankruptcy in Georgia.

In extremely rare circumstances, student loan debt can be partially (or even fully) discharged after filing bankruptcy in Georgia if, in an adversary proceeding, the debtor can show that payment of the student loan will impose an “undue hardship” on them and their dependents.

What is an Adversary Proceeding?

An adversary proceeding is a lawsuit filed within a bankruptcy case. It begins when the debtor files documents with the court to provide the bankruptcy judge with the information needed to determine whether his or her circumstances warrant the discharge of a student loan obligation. The debtor must file a complaint, which must be served on the creditor along with a summons. The creditor is then given a certain amount of time to answer. The final decision regarding the adversary proceeding is made by the bankruptcy judge presiding over the case.

How Does the Judge Determine Whether a Student Loan Payment is an Undue Hardship?

Bankruptcy judges have applied different tests to evaluate whether a debtor’s student loan obligation can be discharged due to an undue hardship. Atlanta, Georgia courts most commonly apply what is known as the “Brunner test.” This test requires that the debtor a show that: 1) he or she cannot maintain, based on current income and expenses, a “minimal” standard of living for himself or herself and his or her dependents if he or she is required to repay the student loans; 2) additional circumstances exist showing that the debtor’s 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.

Courts will also sometimes permit partial discharge of student loans, requiring the debtor to repay only a portion of his or her student loan obligation. However, it is best for debtors to assume that a student loan obligation will not be discharged, since it is so rarely done.

If you are interested in speaking to an attorney in Atlanta, Georgia, about whether bankruptcy can benefit you, please contact the Law Offices of Charles Clapp at (404) 585-0040 or info@lawcmc.com for a free initial consultation.