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Time for a Fresh Look at the “Undue Hardship” Bankruptcy Standard for Student Debtors

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ABSTRACT: In 1978, Congress enacted 11 U.S.C. § 523(a)(8), thereby restricting the availability of student-loan discharge for student debtors. The statute required a student debtor to establish that repaying the loan would cause “undue hardship” in order for a court to grant discharge. “Undue hardship” lacked a definition in § 523(a)(8), however, and courts derived a number of different tests to measure a debtor’s inability to make future loan payments. Circuits were split over two tests: the Brunner test and the totality test. Additionally, regardless of which test a court applied, some courts required the debtor to prove a “certainty of hopelessness” for any future loan repayment. This Note examines different circuits’ approaches to the “undue hardship” determination and advocates for a congressional solution that would codify the Eighth Circuit’s totality test and create a partial discharge provision for debtors who have met the “undue hardship” requirement. The Note argues, in the absence of congressional action, courts should interpret “undue hardship” in a fashion consistent with this Note’s proposed amendments to § 523(a)(8). Alternatively, courts should look to Congress’s definition of “undue hardship” in 11 U.S.C. § 524(m) to provide a basis for interpreting § 523(a)(8). These solutions would provide more clarity to the “undue hardship” standard in changing economic and social times while respecting Congress’s intent and the “fresh start” purpose of the Bankruptcy Code.  

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