Time for a Fresh Look at the 'Undue Hardship' Bankruptcy Standard for Student Debtors

• Author: G. Michael Bedinger VI
• Position: J.D. Candidate, The University of Iowa College of Law, 2014; B.A., The University of North Carolina at Chapel Hill, 2010
• Pages: 1817-1839

1817

Time for a Fresh Look at the “Undue

Hardship” Bankruptcy Standard for

Student Debtors

G. Michael Bedinger VI



ABSTRACT: In 1978, Congress enacted 11 U.S.C. § 523(a)(8), thereby

restricting the availability of student-loan discharge for student debtors. The

statute required a student debtor to establish that repaying the loan would

cause “undue hardship” in order for a court to grant discharge. “Undue

hardship” lacked a definition in § 523(a)(8), however, and courts derived

a number of different tests to measure a debtor’s inability to make future

loan payments. Circuits were split over two tests: the Brunner test and the

totality test. Additionally, regardless of which test a court applied, some

courts required the debtor to prove a “certainty of hopelessness” for any

future loan repayment. This Note examines different circuits’ approaches to

the “undue hardship” determination and advocates for a congressional

solution that would codify the Eighth Circuit’s totality test and create a

partial discharge provision for debtors who have met the “undue hardship”

requirement. The Note argues, in the absence of congressional action, courts

should interpret “undue hardship” in a fashion consistent with this Note’s

proposed amendments to § 523(a)(8). Alternatively, courts should look to

Congress’s definition of “undue hardship” in 11 U.S.C. § 524(m) to

provide a basis for interpreting § 523(a)(8). These solutions would provide

more clarity to the “undue hardship” standard in changing economic and

social times while respecting Congress’s intent and the “fresh start” purpose

of the Bankruptcy Code.

 J.D. Candidate, The University of Iowa College of Law, 2014; B.A., Th e University of

North Carolina at Chapel Hill, 2010. I would like to thank the dedicated editors and writers of

Volumes 98 and 99 of the Iowa Law Review for their creativity and support.

1818 IOWA LAW REVIEW [Vol. 99:1817

I. INTRODUCTION .................................................................................... 1819

II. EVOLUTION OF 11 U.S.C. § 523(A)(8) ............................................... 1819

A. LEGISLATIVE HISTORY: EXCEPTIONS TO THE DISCHARGE OF

EDUCATIONAL LOANS ..................................................................... 1820

B. THE COURT’S ROLE: WHAT IS “UNDUE HARDSHIP”? ........................ 1821

1. The Majority Approach: The Brunner Test ......................... 1823

2. The Minority Approach: The Totality Test ........................ 1824

3. Two Diverging Tests Find Common Ground:

A “Certainty of Hopelessness” ............................................. 1825

C. THE TIME IS RIPE FOR A RE-EXAMINATION OF THE “UNDUE

HARDSHIP” ANALYSIS ..................................................................... 1826

III. TOTALITY TEST: CERTAINLY A BETTER CHOICE THAN BRUNNER, BUT

STILL HOPELESS ................................................................................... 1828

A. WHY DO A MAJORITY OF COURTS FOLLOW THE BRUNNER TEST? ..... 1829

B. THE TOTALITY TEST’S POTENTIAL DOWNFALLS ............................... 1831

C. A CERTAINTY OF HOPELESSNESS: ARE THERE NO PRISONS?

NO WORKHOUSES? ......................................................................... 1833

IV. POTENTIAL SOLUTIONS ....................................................................... 1835

A. CONGRESSIONAL SOLUTION ............................................................ 1836

B. JUDICIAL SOLUTION ........................................................................ 1838

V. CONCLUSION ....................................................................................... 1839