The Brunner Test is the standard used in most courts in the United States (except in the 8th Circuit) to decide whether someone is eligible to discharge their student loan debt in bankruptcy.
The Brunner Test came about in response to Congress’ failure to identify a key term in the United States Bankruptcy Code that bears on student loan debt. The Bankruptcy Code says individuals may discharge student loan debt only if they can prove “repayment would impose an undue hardship on the debtor or the debtor’s dependants.”
Because Congress failed to provide any advice as to the meaning of “undue hardship,” the courts were forced to create their own. The term “Brunner Test” comes from Brunner v. New York State Higher Education Services Corporation, where Marie Brunner attempted to discharge her student loans in bankruptcy on the basis of undue hardship.
The Brunner Test is the most popular standard for adjudicating undue hardship. Although it is often portrayed as an impossibly high hurdle, about 50 percent of bankrupt student loan debtors meet the Brunner Test criteria.
What does Brunner look at?
The Brunner Test asks three questions:
- Can you pay your bills right now and still maintain a minimal standard of living?
- In the foreseeable future, will you earn enough money to make payments on your loans?
- Have you made good faith efforts to pay your loans before bankruptcy?
Roughly, these three prongs of the test translate to a financial analysis of the present, future, and past. Before you obtain a discharge, you must prove to the court that you can’t currently repay your student loans, that you won’t be able to repay your student loans in the future, and that you have made good faith efforts to repay your loans in the past.
The standard of proof in these cases is “preponderance of the evidence,” which means you have to show the court your side of the case is more likely than the lender’s side. Think of a scale where your side is barely heavier than the other side and tilts ever so slightly in your favor.
The three Brunner questions explained
Can you pay your bills right now?
The first question is often the easiest factor to prove. People normally declare bankruptcy only if they cannot afford to pay their bills. In fact, most people who end up in bankruptcy wait far too long to file and only do so when their current financial situation is dire. If that sounds like you, you’ll probably satisfy the first criterion.
Additionally, the court looks at whether you can maintain a minimal standard of living. Luxury cruises or renting a penthouse in Manhattan are out of the question, but the court does not demand you live in your car eating rice and beans three meals a day.
The court will allow for modest transportation costs (a cheap but safe car), market-rate housing, basic entertainment such as an internet subscription or cell phone plan, and medical costs.
Discuss your circumstances with an attorney, but usually, if you are eligible to file Chapter 7 bankruptcy, you have a pretty good case for meeting the first prong of the Brunner Test.
Will you earn enough in the future to make loan payments?
This question is usually the most contentious of the three. The legal arguments focus here, because whether you will have money to repay your student loans in the future tends to be subjective and speculative.
How the court answers this question, though, will depend on factors including your location, profession, qualifications, experience, likelihood of promotion, age, health and wellbeing, and industry’s potential.
In some instances, the question is easier to answer. Teachers, who have some of the highest student debt-to-income ratios in the U.S., often have caps on how much they can earn due to union contracts and the number of hours the school has students in session. They may be able to earn some additional income through private tutoring, but a court does not expect a teacher to work forty hours a week in a school and eighty hours a week as a tutor to attempt to pay off their loans.
Another case where future income is fairly well known is retirees. The fastest-growing group of student debtors are those over 65. If you are no longer able to work and your sole source of income is Social Security, your future financial circumstances are unlikely to change so that you will be able to repay your student loans.
In evaluating your situation, the court will consider all of these factors and attempt to predict whether you will earn enough money in the future to pay back your student loans.
Have you made good-faith efforts to repay your loans?
The third question is the court’s way of asking whether you are having genuine difficulties paying back the debt or simply looking to avoid paying it. To prove “good faith,” you don’t have to show a long history of repaying your debt. Individuals who have never made a student loan payment are able to show good faith.
The operative question is whether you made timely payments on your student loans in the past when you had the means. or did you squander the money on luxury goods.
Your lender will likely not push back too much against the third prong of the Brunner Test if either of the following conditions applies to you:
- You have made timely payments on your student loans for a significant period of time (excluding deferments).
- Due to severe financial distress, you were unable to make timely payments on your student loans.
While each case is unique, these conditions are good predictors of success on the third prong.
Do you pass the Brunner Test?
The purpose of the Brunner Test is for courts to figure out whether you have the means to repay your student loans. Filing an adversary action and applying the Brunner Test to your situation is a complex legal process, so we strongly recommend you consult an attorney.
If the burden of repayment is large enough to constitute “undue hardship,” the court will discharge your student loan debt. For more information on the Brunner test and to determine whether it applies to your situation, create your Lexria account.