Filing for bankruptcy can offer relief from many types of debt, but student loans are a different story. In Arizona, as in other states, the rules for discharging student loans through bankruptcy are strict and challenging to navigate.
Discharging student loans in bankruptcy
Generally, student loans are not dischargeable in bankruptcy under normal circumstances. However, you may be able to discharge them if you prove that paying them would cause “undue hardship.” Courts typically apply a specific test to determine whether undue hardship exists.
The most widely used test for undue hardship is the Brunner Test. This test examines three factors: whether you can maintain a minimal standard of living if forced to repay the loans, whether your financial situation is likely to improve in the future, and whether you have made a good-faith effort to repay the loans.
What makes undue hardship difficult to prove
Proving undue hardship in Arizona can be challenging. Bankruptcy courts are typically reluctant to discharge student loans, and the burden of proof falls on you. You must demonstrate that your financial situation leaves no room for loan repayment and that your circumstances are unlikely to improve.
Arizona courts will carefully evaluate your case. If you cannot show evidence of permanent financial hardship, the court will likely deny your request to discharge student loans. Simply having a large amount of student loan debt or experiencing temporary financial struggles won’t be enough.
Alternatives to discharging student loans
If you cannot discharge your student loans in bankruptcy, you may still have other options. Federal student loan borrowers in Arizona can access income-driven repayment plans, which base your monthly payment on your income and family size.
You can also explore loan forgiveness programs, particularly if you work in public service or meet specific criteria. Some Arizona residents may qualify for state-level loan forgiveness programs or income-based repayment plans.
While discharging student loans in bankruptcy in Arizona can be difficult, you should consider all your options before deciding on a course of action. Bankruptcy may provide relief from other types of debt, but student loan repayment requires a different approach.
