Andrew Brown

Document Type

Research Memorandum

Publication Date




Educational loans made, insured, or guaranteed by a governmental unit are not dischargeable in a bankruptcy case, unless the debtor obtains a hardship determination. This is true even if the loan is made, insured, or guaranteed by a foreign governmental unit. The rationale behind making it difficult to discharge student loans via the United States Bankruptcy Code (the “Code”) is to prevent abuses of the educational loan system, specifically students filing for bankruptcy shortly after graduation to discharge their loans.

Various circuit courts have adopted two tests when applying the undue hardship provision of section 532(a)(8). In 1987, the Second Circuit in Brunner v. New York State Higher Educ. Services Corp., 831 F.2d 395 (2d Cir. 1987), laid out a three-part test which the majority of other circuits have followed when making a hardship determination under section 523(a)(8). However, the Eighth Circuit has consistently rejected the Brunner test in favor of a less restrictive “totality of the circumstances” test.

The purpose of this memo is to determine which circuit a debtor would have the best chance of having their student loan discharged in bankruptcy. Part I of this memo discusses when section 523(a)(8) applies; Part II analyzes the Brunner hardship determination; and Part III explores the Eighth Circuit’s “totality of the circumstances” test.


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