You would think federal law means the same thing in every part of the United States. While this is true in theory, in practice where you live in the United States can lead to different applications of federal law.
The system of courts in the United States includes 12 region-specific “circuits” of federal appeals courts.
Within those circuits are district courts, which include bankruptcy courts. A basic legal principle in the United States is that decisions made by higher courts are binding on lower courts.
That means a bankruptcy court has to follow a decision made by its circuit court (also called a court of appeals).
District courts and bankruptcy courts don’t have to follow a decision made by circuit courts in other circuits (they are non-binding), but they do have to follow a decision made by the circuit court in their own circuit.
For example, a bankruptcy court in Missouri does not have to follow a decision of the 9th Circuit Court of Appeals, based in San Francisco. However, a bankruptcy court in Minnesota does have to follow a decision made by the 8th Circuit Court of Appeals, which is based in St. Louis.
A circuit court has to follow a decision made by the Supreme Court of the United States, the highest court in the country. In some situations, if the Supreme Court has not made a decision about an issue, it is up to the Courts of Appeals to make their own decisions on the issue.
This system often leads to different interpretations of a single piece of federal law among circuits.
Why does my court district matter for student debt?
The U.S. Supreme Court has never made a decision about the definition of “undue hardship” which is the standard a borrower must meet to discharge student loans in bankruptcy.
This means where you live in the United States can impact whether or not you can discharge your student debt in bankruptcy.
What does each circuit say about student debt and bankruptcy?
In most judicial circuits (2nd, 3rd, 4th, 5th, 6th, 7th, 9th, 10th, 11th, and D.C.), the test applied to determine whether you are eligible for student loan discharge in bankruptcy is known as the Brunner Test.
However, in the 8th circuit (North Dakota, South Dakota, Nebraska, Minnesota, Iowa, Missouri, and Arkansas) courts follow a totality of the circumstances test . In the 1st circuit (Maine, New Hampshire, Massachusetts, and Rhode Island), it can be even more complicated, because which test to use is still an open question.
Here’s how to find out which circuit you are located in.
Here’s how to find out which circuit your case should be filed in.
Where you live matters
Where you live in the United States can affect the outcome of a legal case significantly, especially when it comes to student debt. Even if a court applies a federal law to your case, without a Supreme Court ruling as precedent, each circuit is left to its own devices to interpret the law.