Student Loans Are Rarely Discharged in Bankruptcy

You can file for bankruptcy while owing student loans, but the loans themselves almost never go away. Federal student loans and most private student loans are treated as nondischargeable debt — meaning bankruptcy courts will not erase them. Your other debts (credit cards, medical bills, personal loans) may be discharged, but your student loan balance typically remains and must be repaid after bankruptcy.

The one exception is called undue hardship, and it is extremely difficult to prove. You would need to show a court that repaying the loans would prevent you from meeting basic living expenses for the foreseeable future. Courts rarely grant this, and you must file a separate lawsuit called an adversary proceeding within your bankruptcy case to even attempt it.

If you are considering bankruptcy because of student loan debt, you should first explore repayment plans and forgiveness programs that do not require bankruptcy. These routes are faster, cheaper, and more likely to reduce what you owe.

Key Takeaways

  • Student loans cannot be erased in bankruptcy unless you prove undue hardship, which courts grant in fewer than 1 percent of cases.
  • Filing for bankruptcy does pause collection activity and may lower your monthly payment through an income-driven repayment plan, but the loan debt remains.
  • Income-driven repayment plans, Public Service Loan Forgiveness, and Teacher Loan Forgiveness may reduce or erase your loans without bankruptcy.
  • If you file bankruptcy, you must file a separate lawsuit called an adversary proceeding to even request undue hardship discharge.
  • An attorney who handles both bankruptcy and student loans can tell you whether undue hardship is realistic in your situation.

What "Undue Hardship" Actually Means in Court

Courts use a test called the Brunner test (named after a 1987 case) to decide whether repaying student loans would cause undue hardship. You must prove three things: (1) you cannot maintain a minimal standard of living if you repay the loans; (2) this situation will likely continue for a significant portion of the repayment period; and (3) you have made a good-faith effort to repay the loans already.

In practice, this means you need to show the court detailed financial records proving your income is very low and your essential expenses are very high, with little room to pay anything toward the loans. Having a disability, chronic illness, or a dependent with high medical costs strengthens your case. straightforward being unemployed or having high credit card debt does not meet the standard.

The court will also look at whether you have tried income-driven repayment plans. If you have not enrolled in one, the judge may assume your hardship is not truly undue — it is just unmanaged. Courts have become somewhat more willing to grant undue hardship since 2023, but it remains rare.

How Bankruptcy Affects Your Student Loans During the Case

When you file for bankruptcy, an automatic stay goes into effect when ready. This stops most collection activity, including wage garnishment, calls from loan servicers, and offset of tax refunds. Your student loans stop accruing collection fees during the bankruptcy case, though interest usually continues to accrue on federal loans.

If you are in default on your federal loans, bankruptcy does not automatically rehabilitate them. However, you can use the bankruptcy process to catch up on missed payments through a repayment plan, which may bring the loans out of default. Once the bankruptcy is discharged, you can then enroll in an income-driven repayment plan if your income is low.

If you have private student loans, the automatic stay also stops collection efforts, but private loans are treated more like other consumer debt. Some private loans may be discharged in bankruptcy if they are not truly educational loans — for example, a personal loan you took out and used for school expenses. A bankruptcy attorney can review your private loan documents to determine whether discharge is possible.

Income-Driven Repayment as an Alternative to Bankruptcy

Before filing for bankruptcy, you should explore income-driven repayment plans for federal loans. These plans cap your monthly payment at a percentage of your discretionary income — often as low as $0 per month if your income is very low. After 20 to 25 years of payments (depending on the plan), any remaining balance is forgiven.

The four income-driven plans are Income-Based Repayment (IBR), Pay As You Earn (PAYE), Revised Pay As You Earn (REPAYE), and Income-Contingent Repayment (ICR). You can enroll through your loan servicer's website or by calling the Federal Student Aid Information Center at 1-800-4-FED-AID. The process takes about 15 minutes and requires recent tax information.

If you work in public service — government, nonprofit, or certain other sectors — you may also be may be able to access for Public Service Loan Forgiveness (PSLF), which erases remaining federal loan balances after 120 may have access to payments (10 years). Teachers may be may be able to access for Teacher Loan Forgiveness, which can erase up to $17,500 of federal loans after five years of service in a low-income school.

What Happens If You File Bankruptcy Without Seeking Undue Hardship

Many people file for bankruptcy for other reasons — credit card debt, medical bills, or a foreclosure — and straightforward accept that their student loans will survive the bankruptcy. This is a valid choice if your main goal is to discharge other debts and get a fresh start.

After your bankruptcy is discharged, your student loans will still be owed, but you will have eliminated other debts and improved your credit score over time. You can then enroll in an income-driven repayment plan, which will lower your monthly payment based on your current income. If you are unemployed or earning very little after bankruptcy, your payment may be $0.

Bankruptcy does not prevent you from later pursuing forgiveness programs. In fact, being in bankruptcy may have prevented you from enrolling in income-driven repayment earlier, so bankruptcy can be a turning point where you finally get into a manageable repayment structure.

Finding an Attorney and Understanding the Costs

If you think undue hardship discharge might explore to you, you need an attorney who handles both bankruptcy and student loan law. Not all bankruptcy attorneys are experienced with adversary proceedings for student loan discharge, and this is a specialized area.

Many bankruptcy attorneys charge a flat fee for a Chapter 7 bankruptcy (typically $1,200 to $2,500) or a Chapter 13 bankruptcy (typically $2,500 to $6,000), but an adversary proceeding for undue hardship is usually billed separately at an hourly rate. You should ask upfront what the attorney charges for the adversary proceeding and whether they think your case has a realistic chance of success.

Some law schools and legal aid organizations offer free or low-cost bankruptcy consultations. You can find a legal aid office in your area through the Legal Services Corporation website. If you cannot afford an attorney, you can file for bankruptcy without one, but representing yourself in an adversary proceeding is very difficult.

State-Specific Rules and Private Loan Variations

The undue hardship standard is federal, so it applies the same way in every state. However, some states have additional protections for student loan borrowers. For example, a few states limit how much of your wages can be garnished for student loan debt, or they protect certain income sources from offset.

Private student loans are not covered by the same nondischargeability rule as federal loans. Some private loans can be discharged in bankruptcy if they do not meet the legal definition of an educational loan. This depends on the loan documents and the specific lender. A bankruptcy attorney can review your private loan paperwork and tell you whether discharge is possible.

Parent PLUS loans (federal loans taken out by parents for their children's education) are also nondischargeable, even though they are federal loans. The same undue hardship standard applies if you want to try to discharge them.

Frequently Asked Questions

Will filing for bankruptcy stop my student loan payments?

Filing for bankruptcy stops collection activity through an automatic stay, which pauses wage garnishment and collection calls. However, your loans are not erased, and after the bankruptcy is discharged, you will still owe them. You can then enroll in an income-driven repayment plan, which may lower your payment to $0 if your income is very low.

What percentage of people get student loans discharged in bankruptcy?

Fewer than 1 percent of bankruptcy filers attempt to discharge student loans through undue hardship, and courts grant discharge in only a small fraction of those cases. The exact percentage varies by court and year, but undue hardship discharge is genuinely rare.

Can I discharge private student loans in bankruptcy?

Some private student loans can be discharged if they do not meet the legal definition of an educational loan. You need an attorney to review your loan documents and determine whether discharge is possible. Federal student loans and most private loans marketed as student loans cannot be discharged.

Do I have to file an adversary proceeding to discharge student loans?

Yes. straightforward filing for bankruptcy does not give you a chance to discharge student loans. You must file a separate lawsuit called an adversary proceeding within your bankruptcy case and prove undue hardship to a judge. This requires additional legal work and cost beyond the bankruptcy itself.

What should I do before filing for bankruptcy because of student loans?

First, enroll in an income-driven repayment plan through your loan servicer — this takes 15 minutes and may lower your payment to $0. Then check whether you may have access to for Public Service Loan Forgiveness or Teacher Loan Forgiveness. If those do not help, talk to a bankruptcy attorney about whether undue hardship discharge is realistic for you before you file.