Student Loan Bankruptcy: How to Prove Undue Hardship with the Brunner Test

Student loan debt is a hot topic in the political arena. It was also the subject of an important recent decision by the United States Bankruptcy Court for the Western District of Wisconsin. In most cases, student loans cannot be discharged in bankruptcy unless the debtor can demonstrate that repaying these debts would impose an undue hardship. The case of Bradley A. Myhre v. U.S. Department of Education is a recent example of a case in which the court ruled in the plaintiff’s favor and demonstrates the difficulty in proving undue hardship in Milwaukee personal bankruptcy cases.

Bradley Myhre was injured on a swimming pool ladder in 1994. He suffered a C5-C6 injury to his spinal cord, which resulted in paralysis from the chest down and rendered him a quadriplegic. Myhre uses a wheelchair to get around and requires a full-time live-in caregiver to manage his everyday activities.

Prior to his accident, Myhre made hardwood trim and worked as a laborer. Afterwards, however, he relied on Social Security disability payments to provide him with living expenses. Myhre enrolled in college in 2000 and completed an associate degree in computer programming but was still unable to find a job. After five years of looking for work, he enrolled in an online course through Franklin University to obtain his bachelor’s degree. It was at this time that Myhre incurred the student loans relevant to his case.

While he was still attending online courses at Franklin University in 2010, Myhre received an offer of employment from Workforce Connections and began working at the company. The combined strain of working full-time and attending school was too much for Myhre in his disabled condition, and he stopped work on his bachelor’s degree after completing his current semester of studies.

Although Myhre attempted to support himself with his earnings from Workforce Connections, both he and his caregiver declared bankruptcy in 2012. The Department of Education argued that the student loans incurred by Myhre should not be discharged in the bankruptcy for a few reasons:

  • Myhre was already a quadriplegic when he applied for and received the student loans in question.
  • He was working full-time and was earning an income.
  • Myhre did not enroll in a repayment plan as part of his bankruptcy proceedings.
  • He also did not pay the Department of Education out of funds he received as an inheritance from his father.

The court ruled that Myhre had fulfilled the requirements of the Brunner test for undue hardship. This test requires that debtors demonstrate that repaying the loans would prevent them from maintaining a minimal standard of living, that this situation is likely to persist for a prolonged period of time and that the debtor must have made a good faith attempt to pay the loans. This allowed Myhre to discharge his student loans in his bankruptcy proceedings.

Burr Law Office offers practical solutions for Milwaukee personal bankruptcy cases to help our clients navigate the legal system successfully. Our team will work with you to represent your case effectively and to provide you with the right guidance and support throughout the bankruptcy process. Call us today at 262-827-0375 to schedule a free bankruptcy evaluation. We are here to help.

erasing debt with a green eraser

Bankruptcy and Debt Consolidation in Wisconsin

Bankruptcy can have long-term effects on the financial prospects of individuals and families in our area. In many cases, working with a knowledgeable law firm to negotiate debt consolidation in Wisconsin can allow consumers to manage their debts more effectively.

Debt is a huge problem in our country. According to credit bureau Experian, consumer debt soared to $13 trillion in the last quarter of 2018. This represents a serious burden on residents of Wisconsin as well as those throughout the United States. While the Milwaukee Journal Sentinel reported in January 2019 that bankruptcy filings declined for the eighth consecutive year in 2018, farm bankruptcies are on the rise. About 49 farm families filed for bankruptcy in Wisconsin in 2018. That figure is more than double the number of farm bankruptcies in 2009. This increase in bankruptcies corresponds with a recent U.S. Department of Agriculture report that U.S. farm debt amounted to more than $309 million in 2018.

The Basics of Bankruptcy

All bankruptcy cases must be filed in federal courts and are governed by the U.S. Bankruptcy Code. Depending on where you live in Wisconsin, these cases go through the U.S. Bankruptcy Court of the Eastern District or the Western District of Wisconsin. Individuals can file for Chapter 7 or Chapter 13 bankruptcy. Chapter 7 bankruptcy allows for the discharge of debts while paying creditors through the sale of assets held by the debtor. For those who have some ability to repay their creditors, Chapter 13 allows the retention of most property while allowing more time to make payments.

Recent Changes to Federal Law

One case that established an important precedent for future bankruptcy cases was Lamar, Archer & Cofrin, LLP v. Appling, which was decided by the U.S. Supreme Court on June 4, 2018. The high court found that a false statement by a debtor about a single asset could make a debt nondischargeable. This is only true, however, if the false statement was made in writing.

Rule 3002(a) of the U.S. Bankruptcy Code was amended in 2017 to require secured creditors to file a proof of claim with the court before their claims can be allowed. A recent adjustment to Rule 3015 makes the determination of the amount and the priority of secured debts a binding determination. Finally, means testing will be used to determine whether debtors are eligible to file for Chapter 7 bankruptcy or whether they will be required to file for Chapter 13 bankruptcy plans instead.

Avoiding Bankruptcy

A Wisconsin legal team that specializes in Chapter 7 and Chapter 13 bankruptcy proceedings and debt consolidation can act as a partner in managing debts and reaching settlements with creditors. This can reduce the need for bankruptcy in some cases.

If you need help with managing debt consolidation in Wisconsin, Burr Law Office can provide you with practical solutions that suit your needs. We can negotiate with bill collectors and creditors to help you even the playing field and to achieve the best results for your situation. We can help you make the best possible decisions for yourself, your family and your future. Call us today at (262) 827-0375 to schedule a free bankruptcy evaluation. At Burr Law Office, we are here to help.