Loan Discharge StrategiesIn our last blog post we discussed the Brunner test and the fact that many bankruptcy courts across the country use this test to determine a student loan holder's eligibility for discharge. While it is extremely uncommon for anyone to qualify for loan discharge under this legal concept, it should also be mentioned that -- according to a 2011 study -- only about 0.01 percent of people even try to get their student loans legally dissolved. Perhaps if more individuals tried to discharge their student loans, more people would know about the Brunner test and other possibilities available.

Outside the Brunner test, there are some other ways to dissolve educational debt:

Private Student Loans Versus Public Student Loans

As mentioned in a previous blog post, some student loans can be discharged if they are considered to be "private" student loans. Private loans are loans that were used to attend an educational institution that is not legally eligible for federal student aid. In cases where a loan was used to attend a private trade school, for example, the student may be able to show that the loan was not in fact an educational loan as defined by the law. As a result, the loan might be considered a different type of loan that is actually dischargeable.

When Student Loan Money Is Used for Non-Education Expenses

The bankruptcy code defines a student loan as a loan that will be used to pay for education expenses. Education expenses are technically defined within the Higher Education Act to be: university fees, tuition and indirect expenses related to enrollment. In this sense, a computer and other important pieces of equipment that the attending university requires a student to have are also considered educational expenses.

Some student loan borrowers have tried to show that they used part of the student loan money they received on non-eligible education costs. They then argue that the money spent on these non-eligible expenses is dissolvable in bankruptcy. Although it has been successful in certain situations, this is probably one of the more risky arguments to take -- especially considering that most student loans have a clause in which the student agrees to spend the money only on eligible expenses.

Before engaging in any of these strategies, and in order to evaluate whether one has a chance of success by employing them, debt holders may wish to consult with a qualified bankruptcy attorney who is familiar with student loans and how to eradicate them.