Student Loan Bankruptcy Discharge Success — Brunner 3-Prong Test + 2022 DOJ Guidance

BANKRUPTCY LAW SUCCESS · SONG LAW FIRM

Client Profile

Debtor in their early 40s, New Jersey resident. Accumulated federal student loans across undergraduate and graduate education, repaid over 20 years yet balance had grown rather than decreased. Following diagnosis of a chronic autoimmune condition, work capacity reduced by more than half; currently on Social Security Disability Insurance (SSDI).

Case Background

Under 11 U.S.C. §523(a)(8), student loans are generally nondischargeable in bankruptcy. However, an exception applies where the debtor demonstrates "undue hardship" for themselves and dependents. The debtor had cycled through multiple income-driven repayment (IDR) plans without keeping up; after 20 years on IDR, the balance still exceeded the original principal.

Legal Framework — Brunner 3-Prong Test

The Second and Third Circuits — including New Jersey bankruptcy courts — apply the standard from Brunner v. New York State Higher Educ. Servs. Corp., 831 F.2d 395 (2d Cir. 1987). The debtor must prove all three prongs.

• ① Minimal standard of living — Cannot maintain a minimal standard of living for self and dependents if forced to repay
• ② Additional circumstances — State of affairs is likely to persist for a significant portion of the repayment period
• ③ Good faith — Debtor made good faith efforts to repay

Song Law Firm Strategy — Leveraging the 2022 DOJ Guidance

The November 2022 U.S. Department of Justice guidance on student loan discharge, coordinated with the Department of Education, was a paradigm shift. Standardized documentation via a DOJ Attestation Form now streamlines the three-prong analysis and gives DOJ attorneys a clear framework for recommending discharge.

Song Law Firm built a three-track strategy.

• Track 1 — Complete Attestation package. Every field of the DOJ Attestation Form supported by detailed financial statements, medical records, and the SSDI decision letter.
• Track 2 — Medical evidence. Statements from treating physician and specialist establishing the persistence of reduced work capacity — decisive for the additional-circumstances prong.
• Track 3 — Good faith narrative. Two decades of repayment history, IDR re-application records, and deferment/forbearance use organized chronologically to document sustained good-faith efforts.

Process

• Adversary proceeding filed. Under Bankruptcy Rule 7001(6), student loan discharge requires a separate adversary lawsuit against the loan servicer.
• Discovery phase. Full payment history, IDR approvals, and deferment documentation obtained and organized.
• Pre-conference coordination with DOJ. Attestation package presented; DOJ counsel and Department of Education issued a favorable recommendation.
• Consent judgment. Loan servicer withdrew objection; the court entered a consent judgment discharging the full federal student loan balance.

Result

Full discharge of federal student loans confirmed by consent judgment, applying the §523(a)(8) undue hardship exception. Combined with the discharge of other unsecured debts in the underlying bankruptcy, the debtor achieved a genuine fresh start.

Practical Takeaways

• The 2022 DOJ guidance is a game-changer. Success rates were historically very low; standardization via the Attestation framework has meaningfully improved approval outcomes.
• Medical and disability evidence is central. SSDI determinations, treating-physician statements, and persistence findings drive the additional-circumstances prong.
• Build the good-faith narrative chronologically. Scattered payment records must be reconstructed into a coherent timeline.
• Adversary proceedings are separate. A Chapter 7 or 13 petition alone does not discharge student loans — a separate lawsuit is required.

Frequently Asked Questions

Q1. Chapter 7 or Chapter 13 — which is better for student loan discharge?

Either can support the adversary proceeding. Chapter 7 tends to move faster and lacks disposable-income scrutiny, which suits simpler cases.

Q2. Are private student loans also dischargeable?

Private loans that do not meet the definition of a qualified education loan fall outside §523(a)(8) and are treated as ordinary unsecured debt. Original loan agreements must be reviewed.

Q3. Does the 2022 DOJ guidance apply in New Jersey bankruptcy courts?

Yes. DOJ represents the government (Department of Education) in bankruptcy proceedings nationwide; the guidance is a national standard, and New Jersey courts respect it in practice.

Q4. Is SSDI enough to establish undue hardship?

SSDI does not automatically discharge student loans, but it is powerful circumstantial evidence supporting the additional-circumstances prong.

Q5. How long does Attestation preparation take?

Typically 6–12 weeks to assemble financial and medical records. Thoroughness at this stage improves approval odds substantially.