Eighth Circuit Applies Novel Test In Recent Student Loan Discharge Case

In a recent decision considering the dischargeability of student loan debt, the Eighth Circuit Court of Appeals affirmed a lower court's decision establishing a unique and flexible test for determining whether repaying student loans imposes an "undue hardship" on a debtor.

Under the Bankruptcy Code, graduates generally cannot discharge student loan debt absent certain conditions. Section 528(a)(8) of the Bankruptcy Code provides that a bankruptcy discharge does not apply to student loans unless excepting student loans from discharge "would impose an undue hardship on the debtor and the debtor's dependents[.]" 11 U.S.C. § 528(a)(8). In the absence of an "undue hardship" definition in the Bankruptcy Code, most courts rely on Brunner v. New York State Higher Education Services to determine whether a student loan imposes an undue hardship, and is therefore dischargeable in bankruptcy. 831 F.2d 395...