Fifty-Six Year Old Debtor Failed to Show “Undue Hardship” if Student Loan Debt in the Amount of $260,000 Was Not Discharged

Student loan debt is very difficult to discharge in bankruptcy.



Student debt is normally not dischargeable in bankruptcy unless the debtor proves that excluding the loans from discharge “would impose an undue hardship on the debtor.”  The  following is a briefing on a representative case that shows how difficult it is to prove “undue hardship.”


In In re Tetzlaff, the Seventh Circuit Court of Appeals affirmed the District Court’s affirmance of a bankruptcy court decision holding that a chapter 7 consumer debtor failed to demonstrate “undue hardship” if his student loan debt was not discharged.

The debtor was a 56 year old, unemployed, divorced man living with his mother and subsisting with her on the income from her Social Security payments.  He pursued, and apparently obtained, a Masters in Business Administration and a law degree but failed repeated efforts to pass a state bar exam.  Prior to attending graduate school he worked as a financial advisor, an employee-benefits consultant, an insurance salesman and a stock broker.  He suffered with depression and alcoholism and was involved in domestic disputes.  He has several misdemeanor convictions.  He contended that these factors make it difficult for him to find a job.

The Debtor’s Bankruptcy Case and Efforts to Discharge Student Loan Debt

The debtor filed for chapter 7 bankruptcy and sought, as part of his case, to have student debt incurred in connection with the pursuit of the MBA degree discharged.  Student debt is normally not dischargeable in bankruptcy unless the debtor proves that excluding the loans from discharge “would impose an undue hardship on the debtor.”

What is Undue Hardship for Purposes of Discharging Student Loan Debt?

The Seventh Circuit, in determining what situations constitute “undue hardship,” has adopted the so-called “Brunner” test.  That test requires the debtor to show that:

(1) he cannot maintain, based on current in-come and expenses, a “minimal” standard of living for himself and his dependents if forced to repay his loans;

(2) additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period; and

(3) he made good faith efforts to repay the loans.

In this case, the bankruptcy court found that the debtor satisfied the first element, but that he failed to meet the latter two elements.  The District Court affirmed, and the debtor appealed.  On appeal, the Seventh Court accepted for purposes of its analysis that the debtor had met the first Brunner element, and proceeded to examine the “additional circumstances” prong and the “good faith” prong.

The “Additional Circumstances” Prong of Undue Hardship

In the case, the Seventh Circuit construed the “additional circumstances” test to require a showing of a “certainty of hopelessness, [and] not simply a present inability to fulfill financial commitment.”  The appellate court concluded that the bankruptcy court’s findings that (i) the debtor’s financial situation may improve given his MBA, his intelligence and his writing ability; (ii) his family issues were largely over, and (iii) the debtor is not mentally ill and is able to earn a living were not clearly erroneous and amply supported the bankruptcy court’s ruling that the debtor failed to satisfy the “additional circumstances” test.

The “Good Faith” Prong of Undue Hardship

As for the “good faith” prong, the Seventh Circuit observed that a debtor’s demonstrated efforts to pay off existing loans, together with a debtor’s ability to obtain employment, maximize income and minimize expenses is relevant to assessing the debtor’s good faith.  While the debtor had repaid much of his law school student loan debt, he paid nothing on the debt at issue in the case.  The debtor argued that his pay down of the unrelated debt was material to his good faith showing, but the Seventh Circuit was not persuaded, observing that the debtor’s repayment of other student loan debt does not demonstrate good faith to pay the wholly unpaid student loan debt that was sought to be discharged.  In support, the Seventh Circuit cited a case from another district holding that “there is no authority that suggests a debtor who pays down on loan while neglecting another acts in good faith.”  Under these circumstances, the Seventh Circuit affirmed the bankruptcy court’s conclusion that the debtor failed to make a good faith effort to pay down student loan debt.

Key Takeaway

Student loan debt continues to be problematic in consumer bankruptcy cases and “undue hardship” is generally not susceptible to simple proof.

If you’re struggling with too much debt, whether or not its student loan related, and would like to consider options for dealing with your situation, contact my office 914-385-1032, or


We are a debt relief agency, we help people file for Bankruptcy under the Bankruptcy Code. This Blog is made available by the lawyer or law firm publisher for educational purposes only as well as to give you general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand that there is no attorney-client relationship between you and the Blog publisher. The Blog should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.



Author: westchesterbankruptcylawyer Ted Zink | Featured Attorney Bankruptcy

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