8th Circuit Gives Student Loan Borrowers Expect Bankruptcy

In the field of student education loans, everything has gotten very desperate.? For people unburdened by student debt, bankruptcy is a last act of desperation.? It’s devastating consequences, but it is a path to a brand new start.? Yet this act of monetary desperation is something that lots of student loan borrowers are only able to dream of.

The recent news in the 8th Circuit isn’t a game-changer, as well as for most it isn’t a blip around the radar.? However, for a detailed look, and squint your vision just right, you can observe a glimmer of faint light at the end of the tunnel.

The Current Law

For years, education loan bankruptcy cases have been guided through the Brunner vs. Ny State Higher Education Services case.? Under the Brunner test, a borrower must be in a position to prove the next three things in order to have his or her student education loans discharged inside a bankruptcy:

  1. He cannot conserve a minimal standard of living for himself and his dependents if forced to repay the loans,
  2. That additional circumstances exist that tend to indicate that this condition will probably persist for any significant portion of the life of the loan, and
  3. That he’s made a good faith effort to repay the loan.

This test is the reason that most people express it is “nearly impossible” to release student education loans in bankruptcy.? It is also a primary reason that many bankruptcy lawyers are reluctant to take a education loan case (although it is among several).

Recent Developments

The latest case from the 8th Circuit,?Conway v. National Collegiate Trust, has cast some doubt upon the Brunner test.? A legal court used a “totality of the circumstances” test, especially rejecting the low Courts argument that simply since the student debtor were built with a degree, she didn’t necessarily have the ability to make more money than her current job like a waitress later on.? Previously, holders of degrees usually lost on the second factor of the Brunner test, with lenders arguing that simply because they possess a degree, they can earn more money later on.

Hope for future years?

Cynics will begin to explain the language in the Conway decision is weak and that it only applies in a few States (Minnesota, Iowa, North Dakota, South dakota, Nebraska, Missouri, and Arkansas).??? Additionally, this example wasn’t even a published decision, meaning it has less weight than other decisions.

Though this example is hardly a landslide for student debtors, those familiar with the legislation realize that it rarely moves drastically or swiftly.? In the courts, progress is usually made bit by bit.? Ever class we find out about the landmark cases, but the the truth is that the courts change things very slowly.? The same sex marriage cases are a good recent illustration of this nature.? Last year, the Supreme Court struck down one clause of the Defense of Marriage Act.? Previously year, new cases have sought, many successfully, to grow this decision.? This problem is among a number of examples, in which the courts incrementally alter the law.

What does it mean?

In the fight to revive bankruptcy rights to student education loans, the Conway decision will long be forgotten.? At best it represents a small step in a very long journey… but it is a step in the right direction.