Sympathy for the Debtor? Not When It Comes to Student Loans

The Bankruptcy Code does not define "undue hardship." However, in Brunner v. New York State Higher Education Services, 831 F.2d 395 (2d Cir. 1987), the U.S. Court of Appeals for the Second Circuit adopted a three-prong test for evaluating "undue hardship" claims. According to the Brunner test, in order to justify the discharge of student loan debt, a debtor must prove: an inability to maintain a minimal standard of living; the inability is likely to persist for a significant portion of the loan repayment period; and a good faith effort to repay the loan. The Brunner test has been strictly applied in a majority of circuits and has resulted in an exceptionally demanding standard that, in most circumstances, prevents discharge of a student loan obligation in bankruptcy without the consent of the student loan lender.

In In re Thomas, 931 F.3d 449 (5th Cir. Jul. 30 2019), the U.S. Court of Appeals for the Fifth Circuit considered whether the Brunner test should be strictly applied to a "sympathetic" debtor seeking a discharge of her student loan obligations. Looking to the language of the statute and citing Congressional intent, the court concluded that it must apply the Brunner test to sympathetic and unsympathetic debtors alike. The court further recognized that any relief from, or change to, the Brunner test must come from Congress and not the courts.