You can file bankruptcy for student loans, but educational debt doesn’t wipe out automatically the way credit card balances or medical bills do. To erase student loans, you generally have to file a separate lawsuit inside your bankruptcy case, called an adversary proceeding, and prove that repaying the loans would cause “undue hardship” for you and your dependents. A 2022 Department of Justice policy change made that showing far more realistic for federal loan borrowers, and some private loans may not require the hardship showing at all.
Why Student Loans Are Treated Differently
Federal bankruptcy law lists student loans as one of the debts that survive a standard discharge. The statute covers debts funded by the government, by nonprofit institutions, and any loan meeting the definition of a “qualified education loan,” and keeps those debts alive after bankruptcy unless you prove undue hardship.1Office of the Law Revision Counsel. 11 U.S. Code 523 – Exceptions to Discharge
A qualified education loan broadly means debt taken on solely to pay higher education expenses at an eligible school, including tuition, fees, room, board, and books.2Office of the Law Revision Counsel. 26 U.S. Code 221 – Interest on Education Loans Refinanced student loans fall into this category too. Congress never defined “undue hardship,” so courts filled the gap with their own tests.
The DOJ Process for Federal Student Loans
In November 2022, the Department of Justice overhauled how the federal government handles student loan bankruptcy cases. Before the change, DOJ attorneys reflexively opposed nearly every discharge attempt. Now, borrowers submit an attestation form to the DOJ attorney assigned to the case, and the government evaluates whether it should agree to discharge rather than fight it at trial.
The attestation collects information about income, expenses, household size, employment history, and loan details. DOJ attorneys measure allowable expenses against IRS Collection Financial Standards to see whether those expenses exceed your gross income. If they do, the first element of undue hardship is satisfied.3Department of Justice. Student Loan Discharge Guidance
On the question of whether hardship will continue, the DOJ presumes it will if any of the following apply:
- You are 65 or older.
- You have a disability or chronic injury affecting your earning potential.
- You’ve been unemployed for at least five of the last ten years.
- You never completed the degree the loan was for.
- The loan has been in repayment status for at least ten years.
- Your school has closed.
The good-faith element also loosened. Skipping an income-driven repayment plan no longer counts against you automatically. DOJ attorneys are directed to consider whether you got bad information, were wrongly denied an IDR plan, or lacked guidance about your options.3Department of Justice. Student Loan Discharge Guidance
When the DOJ concludes your case meets the standard, the attorney can stipulate to discharge without a trial. If the facts are clearly demonstrated in your complaint or existing records, the DOJ may skip the attestation form entirely. The guidance also lets DOJ attorneys recommend partial discharge when a borrower can pay some amount but not the full monthly payment, with any remaining balance sized so that discretionary income can actually cover it.3Department of Justice. Student Loan Discharge Guidance
Private Loans That May Not Need Hardship at All
The undue hardship requirement applies only to qualified education loans. If your private loan falls outside that legal definition, it can be discharged like ordinary consumer debt, without an adversary proceeding or hardship showing.
A private loan may fall outside the qualified category if:
- It was used at a school not eligible for federal student aid, such as unaccredited institutions, certain foreign schools, or unaccredited trade programs.
- The funds went directly to you rather than being certified through the school.
- The loan amount exceeded the school’s official cost of attendance.
- The money paid for expenses unrelated to an eligible education program.
The Consumer Financial Protection Bureau has confirmed that loans for education at institutions ineligible for Title IV federal aid are not subject to the undue hardship standard and can be discharged in a normal bankruptcy.4Consumer Financial Protection Bureau. Busting Myths About Bankruptcy and Private Student Loans The burden falls on the lender to prove the loan qualifies for the protection. If the lender can’t demonstrate every element, the debt gets treated as regular consumer debt.
How Courts Decide Undue Hardship
If your case doesn’t settle through the DOJ process, or your loan is a qualified private loan, a bankruptcy judge decides undue hardship using one of two frameworks. Which one applies depends on your circuit.
The Brunner Test
Most federal circuits use the Brunner test, and you must satisfy all three elements:
- Minimal standard of living. You cannot maintain a basic standard of living for yourself and your dependents if forced to repay. Courts weigh current income against essential monthly expenses.
- Persistent hardship. Your financial situation is likely to stay this way for a significant portion of the repayment period. A temporary rough patch won’t qualify.
- Good faith effort. You made genuine attempts to repay before seeking bankruptcy, including trying income-driven repayment or contacting your servicer about options.
Brunner has a reputation for being nearly impossible to satisfy, and the persistent hardship prong is where most cases fall apart. Borrowers approaching retirement have a stronger argument, because earning potential is declining rather than growing.
Totality of the Circumstances
The First and Eighth Circuits rejected Brunner in favor of a broader approach. Judges weigh past, present, and reasonably foreseeable future financial resources, necessary living expenses, and any other relevant facts. If the full picture shows you can’t repay while maintaining a basic standard of living, the court can grant discharge. This test is generally considered more favorable to borrowers.
How the Adversary Proceeding Works
The lawsuit runs inside your existing bankruptcy case. You file a Complaint to Determine Dischargeability of Debt with the bankruptcy court, and many courts publish templates on their websites. The federal fee schedule waives the usual $350 adversary filing fee when the debtor files the complaint, which is always the case here.5United States Courts. Bankruptcy Court Miscellaneous Fee Schedule
After filing, the court issues a summons that gets served on the creditor. Private lenders have 30 days to answer. For federal loans, the defendant is the United States, which has 35 days.6Legal Information Institute. Federal Rules of Bankruptcy Procedure Rule 7012 – Defenses and Objections If the creditor doesn’t respond, you may get a default judgment. More commonly, cases move into discovery where both sides exchange financial information. For federal loans, this is where the DOJ attestation process runs. Many cases resolve at this stage through full discharge, partial discharge, or modified repayment terms without a trial. If no agreement is reached, a bankruptcy judge decides.
Courts can also modify loan terms rather than discharge principal, for example by lowering the interest rate or extending the repayment period.7Federal Student Aid. Discharge in Bankruptcy
Evidence You’ll Need
The same core question drives both the DOJ attestation and a contested trial: can you pay, and will that change? Prepare your most recent federal tax returns for at least two to three years, recent pay stubs, and records of any other household income including benefits, pensions, or support payments. The DOJ attestation accepts tax returns when income hasn’t materially changed, or an average calculated from four consecutive pay stubs from the prior two months.8United States Department of Justice. Attestation in Support of Request for Stipulation Conceding Dischargeability of Student Loans
Build a detailed monthly household budget covering housing, utilities, food, transportation, medical costs, insurance, and childcare. The DOJ measures your expenses against IRS Collection Financial Standards, which set allowable thresholds by household size.8United States Department of Justice. Attestation in Support of Request for Stipulation Conceding Dischargeability of Student Loans
If your hardship claim involves health problems, collect medical records and physician statements documenting how the condition limits your ability to work. For employment-related claims, keep records of job searches, termination letters, or vocational assessments.
You’ll also need a complete loan history. Federal loan details are available through studentaid.gov. For private loans, request records directly from the lender. Your complaint should list each loan by identification number with origination dates, interest rates, and payment history.
Chapter 7 or Chapter 13
You can pursue student loan discharge under either chapter, and the undue hardship standard is the same in both. The adversary proceeding also runs the same way. What differs is the surrounding case.
Chapter 7 typically wraps up in three to four months, so the adversary proceeding may be the only active piece of litigation. Chapter 13 runs a three-to-five-year repayment plan alongside the adversary proceeding.
The bigger difference is cosigners. Chapter 13 includes an automatic codebtor stay that blocks creditors from pursuing anyone who cosigned your consumer debts while the case is active.9Office of the Law Revision Counsel. 11 U.S. Code 1301 – Stay of Action Against Codebtor Chapter 7 has no equivalent. If someone cosigned your loan and you file Chapter 7, the lender can immediately pursue the cosigner for the full balance.
A discharge is also personal to the filer. Even if you succeed, your cosigner remains fully liable, and the lender will likely turn to them. The Chapter 13 codebtor stay only lasts while the case is open; when it closes, is dismissed, or converts to Chapter 7, that protection ends.9Office of the Law Revision Counsel. 11 U.S. Code 1301 – Stay of Action Against Codebtor
Will You Owe Taxes on a Discharge
Canceled debt is normally treated as taxable income, and the temporary shield for student loan forgiveness under the American Rescue Plan Act expired at the end of 2025. Starting in 2026, forgiven student loan debt is once again generally treated as cancellation of debt income.10Taxpayer Advocate Service. What to Know About Student Loan Forgiveness and Your Taxes
Bankruptcy discharge is the major exception. Federal tax law specifically excludes any debt discharged in a bankruptcy case from gross income.11Office of the Law Revision Counsel. 26 U.S. Code 108 – Income From Discharge of Indebtedness If your student loans are wiped out through an adversary proceeding, you won’t owe federal income tax on the forgiven amount, regardless of the balance. That’s one of the real advantages of pursuing discharge in bankruptcy rather than waiting for a repayment plan to cancel the balance and generating a tax bill in the process.