What is the Brunner test for student loans in bankruptcy?

Where does the test come from?

Bankruptcy law says a student loan is discharged only if repaying it would impose an undue hardship on you and your dependents. Courts have had to work out what that phrase means, and they do not all use a single test.2 3

The framework used most often takes its name from Brunner v. New York State Higher Education Services Corp., a 1987 decision of the federal appeals court for the Second Circuit.1

What do you have to show?

The court must find that you have established each part. Since November 2022, Justice Department attorneys in federal student loan cases have had written instructions on how to assess each one.1 4

Why does it have a reputation for being impossible?

The Justice Department has acknowledged the problem in writing. Its guidance says some borrowers were deterred from seeking a discharge by the historically low probability of success, and by the mistaken belief that student loans cannot be discharged at all.1

Others, it says, were put off by the cost and intrusiveness of the lawsuit itself.1

Part of that belief came from loan servicers. The guidance records a Consumer Financial Protection Bureau finding that servicers falsely told borrowers their loans could never be discharged in bankruptcy.1

The good faith part comes with a caution. The guidance quotes an appeals court's warning that the good faith inquiry should not be used to impose a court's own values on a borrower's life choices.1

What changed with the Justice Department guidance?

The test itself did not change. The guidance says it does not replace the case law of each federal circuit. What changed is how the party on the other side of a federal student loan case approaches it.1 4

• On present circumstances, government attorneys use published IRS standards to judge expenses, and a reasonable explanation for higher expenses may be accepted.1
• On future circumstances, they work from presumptions that can be rebutted only with concrete facts, not conjecture about what might happen.1
• On good faith, they work from a list of steps and are told not to disqualify borrowers whose inaction followed possible misinformation or wrongful decisions.1

The guidance states its aims plainly: expectations that borrowers can understand with or without a lawyer, a lighter fact-gathering burden, and more cases in which the government supports a discharge where the facts warrant it.1

One thing stays the same before the judge. The presumptions do not shift the burden of proof: you still have to prove every element of undue hardship, and the government's position does not bind the court.1

Do all courts use Brunner?

No. Some courts use a totality of circumstances test. The Justice Department guidance points to a 2003 decision of the federal appeals court for the Eighth Circuit as an example. That test looks at your past, present and reasonably reliable future financial resources, the reasonably necessary living expenses of you and your dependents, and any other relevant facts of the case.1

The difference may matter less than it sounds. According to the guidance, both tests look at your income and reasonable expenses to judge whether you can keep a minimal standard of living while repaying, now and later, and both look at your past efforts to repay. The guidance applies under both.1

Which test your court uses, and how strictly it reads each part, is a question for a lawyer who practices there.

How is the test applied in a real case?

Undue hardship is decided in an adversary proceeding, a separate lawsuit inside your bankruptcy case. The bankruptcy court has to make its own determination of undue hardship even if the creditor does not object or appear.4 1

The two sides may agree on certain facts and recommend that the court find undue hardship based on them. In federal loan cases, the attestation form is how the government gathers what it needs to decide whether to do that.1 4

If the court finds undue hardship, Federal Student Aid says the loan may be fully discharged, partially discharged, or kept with different terms such as a lower interest rate.3