Bankruptcy

==Modern law and debt restructuring==
The principal focus of modern insolvency legislation and business [[debt restructuring]] practices no longer rests on the elimination of insolvent entities, but on the remodeling of the financial and organizational structure of debtors experiencing [[financial distress]] so as to permit the rehabilitation and continuation of the business.

For private households, it is important to assess the underlying problems and to minimize the risk of financial distress to recur. It has been stressed that debt advice, a supervised rehabilitation period, financial education and social help to find sources of income and to improve the management of household expenditures must be equally provided during this period of rehabilitation (Refiner ''et al.'', 2003; Gerhardt, 2009; Frade, 2010). In most EU member States, debt discharge is conditioned by a partial payment obligation and by a number of requirements concerning the debtor's behavior. In the United States (US), discharge is conditioned to a lesser extent. The spectrum is broad in the EU, with the UK coming closest to the US system (Reifner et al., 2003; Gerhardt, 2009; Frade, 2010). The Other Member States do not provide the option of a debt discharge. Spain, for example, passed a bankruptcy law (''ley concurs'') in 2003 which provides for debt settlement plans that can result in a reduction of the debt (maximally half of the amount) or an extension of the payment period of maximally five years (Gerhardt, 2009), but it does not foresee debt discharge.<ref>Dubois & Anderson (2010) Managing household debts: Social service provision in the EU. Working paper. Dublin: European Foundation for the Improvement of Living and Working Conditions. [http://www.eurofound.europa.eu/areas/socialprotection/householdebts.htm euro found.europa.eu]. {{webarchive|url=https://web.archive.org/web/20131107145903/http://www.eurofound.europa.eu/areas/socialprotection/householdebts.htm |date=2013-11-07 }}.</ref>

In the US, it is very difficult to discharge federal or federally guaranteed student loan debt by filing bankruptcy.<ref>{{cite news|last1=Ferral|first1=Katelyn|title=Narrow bankruptcy laws make it nearly impossible to discharge student debt|url=http://host.madison.com/ct/news/local/govt-and-politics/narrow-bankruptcy-laws-make-it-nearly-impossible-to-discharge-student/article_927360b1-48c0-5f4c-978b-fcffe910f490.html|access-date=13 March 2018|agency=The Cap Times|publisher=Madison.com|date=28 December 2017|url-status=live|archive-url=https://web.archive.org/web/20180313214310/http://host.madison.com/ct/news/local/govt-and-politics/narrow-bankruptcy-laws-make-it-nearly-impossible-to-discharge-student/article_927360b1-48c0-5f4c-978b-fcffe910f490.html|archive-date=13 March 2018}}</ref> Unlike most other debts, those student loans may be discharged only if the person seeking discharge establishes specific grounds for discharge under the ''Brunner'' test,<ref name=brunner>{{cite web|last1=Treff|first1=Leslie|title="Undue Hardship" Under Section 523(a)(8): Can the Debtor's Student Loans Be Discharged?|url=https://www.lexisnexis.com/legalnewsroom/bankruptcy/b/bankruptcy-law-blog/archive/2012/08/30/quot-undue-hardship-quot-under-section-523-a-8-can-the-debtor-s-student-loans-be-discharged.aspx|website=LexisNexis Legal Newsroom|access-date=13 March 2018|date=29 October 2012|url-status=live|archive-url=https://web.archive.org/web/20180314042415/https://www.lexisnexis.com/legalnewsroom/bankruptcy/b/bankruptcy-law-blog/archive/2012/08/30/quot-undue-hardship-quot-under-section-523-a-8-can-the-debtor-s-student-loans-be-discharged.aspx|archive-date=14 March 2018}}</ref> under which the court evaluates three factors:
* If required to repay the loan, the borrower cannot maintain a minimal standard of living;
* The borrower's financial situation is likely to continue for most or all of the repayment period; and
* The borrower has made a good faith effort to repay the student loans.<ref name=brunner/>
Even if a debtor proves all three elements, a court may permit only a partial discharge of the student loan. Student loan borrowers may benefit from restructuring their payments through a [[Chapter 13, Title 11, United States Code|Chapter 13]] bankruptcy repayment plan, but few qualify for discharge of part or all of their student loan debt.<ref>{{cite journal|last1=Gerson|first1=Seth J.|title=Separate Classification of Student Loans in Chapter 13|journal=Washington University Law Quarterly|date=January 1995|volume=73|issue=1|page=269|url=http://openscholarship.wustl.edu/law_lawreview/vol73/iss1/5|url-status=live|archive-url=https://web.archive.org/web/20170223001445/http://openscholarship.wustl.edu/law_lawreview/vol73/iss1/5/|archive-date=2017-02-23}}</ref>