An adversary preceding is a separate legal action taken during a bankruptcy case that seeks to achieve federal student loan discharge. It is, essentially, a lawsuit that you are launching to obtain student loan relief. 

Most private student loans may be discharged in normal bankruptcy proceedings. 

When you launch an adversary preceding, you are making a statement that says paying off your student loans will cause an undue hardship. 

Steps in the Adversary Proceeding

The steps are as follows:

1. Your lawyer files a complaint with the court.
2. The defendant has 30 to 35 days to file either an answer or a motion to dismiss.
3. Both sides engage in the discovery process.
4. Both sides engage in settlement conferencing. 
5. If no settlement is reached, a date is set for trial.
6. The court hears the evidence and then makes a decision as to whether or not your case is eligible for federal student loan relief.
7. In some cases, it may be possible for the losing party to appeal the decision. 

Proving Undue Hardship

New York uses the “Brunner Test.” The test was, in fact, born in the Bankruptcy Court for the Western District of New York.

The Brunner test is a three-prong test that asks:

• Has the borrower made a good-faith effort to repay the loans?
• Is the borrower unable to maintain a minimal standard of living while making payments? Under the new Department of Education guidance, federal loans would use IRS Standards. 
• Is the borrower’s financial situation likely to persist? 

The test is highly subjective and depends a great deal on the judge that’s hearing the case. 

Resolving the Adversary Proceedings

The judge has several options. First, your petition to discharge your student loans may be denied. Second, the entirety of your student loans may be discharged. The judge also has the option to create a settlement wherein the loan holder wipes a significant portion of your debt, allowing you to pay a reduced sum.

If you cannot get your loans discharged through bankruptcy, you may be able to take advantage of repayment plans instead. In addition, discharging your other debts in bankruptcy could free up the resources you need to address student loan payments. 

Get Help Today 

If you’re drowning because of student loan payments, contact our law office for help. Schedule a free consultation to determine whether bankruptcy can help you take control of your financial future.

See also:

How to Prepare For Your Free Bankruptcy Consultation

How to Choose the Right Bankruptcy Chapter 

Are You Waiting Too Long to File Your Orange County Bankruptcy?