Can You File Bankruptcy for Student Loans? Undue Hardship Rules

You can file bankruptcy for student loans, but the loans do not vanish the way credit card balances do. Discharging them requires a separate lawsuit inside your bankruptcy case, called an adversary proceeding, in which you prove that repaying the debt would cause an undue hardship on you and your dependents. That standard used to defeat almost everyone who tried. Since a Department of Justice policy change in November 2022, borrowers with federal loans have a structured path that produces discharge far more often, and private loans remain dischargeable through the traditional route.

Why Student Loans Take an Extra Step

Federal bankruptcy law presumes student loans survive bankruptcy. Chapter 7 and Chapter 13 both wipe out most unsecured debts, but educational loans are specifically excluded unless the court finds that repaying them would impose an undue hardship.¹ The exclusion covers federal loans, loans guaranteed by government agencies or nonprofits, and private loans that qualify as “qualified education loans” under the tax code.

The statute never defines undue hardship. Courts have filled the gap for decades, and the Department of Justice has acknowledged that the resulting confusion, combined with a widespread belief that student loans are simply impossible to discharge, has kept eligible borrowers from seeking relief they would have received.²

How Courts Measure Undue Hardship

Two frameworks are in use across the country, and which one applies depends on your federal circuit.

The Brunner Test

Most circuits use the Brunner test, from a 1987 Second Circuit case. It requires three showings: that you cannot maintain a minimal standard of living if forced to repay, that your circumstances are likely to persist for a significant portion of the repayment period, and that you have made good-faith efforts to repay.²

The first prong compares your income to necessary expenses. Courts are not looking for destitution, but they want to see that repayment would push you below a basic standard of living. The second prong historically defeated many cases because courts wanted proof of something durable blocking your earning potential, such as chronic disability, advanced age, or a field with no realistic advancement. The third prong asks whether you tried. Enrolling in income-driven repayment, requesting deferment, or communicating with your servicer all count.

The Totality of the Circumstances Test

The First and Eighth Circuits use a broader approach. A judge weighs your past, present, and reasonably reliable future financial resources against your necessary living expenses and any other relevant factors, without the three-prong structure. This test gives judges more room and is generally viewed as friendlier to borrowers, though you still have to show that repayment is not feasible over the long term.

The DOJ Attestation Process for Federal Loans

The biggest practical change for borrowers came in November 2022, when the Department of Justice and the Department of Education adopted standardized criteria for evaluating student loan bankruptcy cases. Before the guidance, every case was a full courtroom fight and government attorneys had no consistent framework for deciding when to oppose discharge.³

Under the current process, borrowers with federal Direct Loans and other Department of Education-held debt complete an Attestation Form, a sworn statement covering income, expenses, loan history, and the reasons repayment is impossible.⁴ Government attorneys evaluate the form against structured criteria rather than making ad hoc judgment calls.

The DOJ uses IRS Collection Financial Standards to assess whether your reported expenses are reasonable, comparing them against national benchmarks for food, clothing, and personal care and local standards for housing, utilities, and transportation. If your income falls short of allowable expenses after loan payments, you have satisfied the present-inability prong.²

For the forward-looking prong, the guidance creates a presumption that your situation is unlikely to improve if any of the following apply:

You are 65 or older.
You have a disability or chronic injury that limits your earning potential.
You have been unemployed for at least five of the last ten years.
You never obtained the degree the loan was supposed to fund.
The loan has been in repayment status for at least ten years.

Meeting one of these does not guarantee discharge, but it shifts the analysis in your favor. When the government concludes the hardship standard is met, the DOJ attorney stipulates to discharge instead of opposing it in court, which eliminates the trial and cuts legal costs and time.²

This process applies only to federal loans held by the Department of Education. Private lenders are not bound by the criteria.

Private Student Loans

Private loans fall into two categories that borrowers routinely confuse. A private loan that qualifies as a “qualified education loan” under the tax code gets the same undue-hardship protection as federal loans.¹ Some private loans do not meet that definition, and those can be discharged like ordinary unsecured debt with no hardship showing required.

A private loan may fall outside the protected category if it was used at a school that was not eligible for federal financial aid, if the funds were paid directly to the borrower rather than certified through the school, if the amount exceeded the school’s cost of attendance, or if the money was spent on expenses unrelated to an eligible educational program. If any of these apply, your attorney should argue the loan is not shielded by the undue-hardship requirement at all.

For private loans that do require the hardship showing, the process is more adversarial. There is no attestation form, no DOJ guidance, and no presumptive factors working for you. Private lenders sometimes offer settlements during the adversary proceeding rather than going to trial, potentially reducing the balance or lowering the interest rate. Read settlement terms carefully; some agreements revert to the original loan terms if you miss a payment under the new arrangement.

Chapter 7 or Chapter 13

Both chapters require a separate adversary proceeding to discharge student loans. Neither eliminates them automatically. The interaction with the rest of your case differs.

In Chapter 7, your other dischargeable debts are eliminated quickly, usually within a few months. Filing triggers an automatic stay that pauses collection while the case is open. Filing the adversary proceeding alongside your Chapter 7 asks the court to discharge the student loans with everything else. Even if the loans survive, wiping out credit card debt and medical bills may free enough income to make the payments manageable.

Chapter 13 puts you on a three-to-five-year repayment plan, and student loans are classified as non-priority, non-dischargeable unsecured debt. Federal loans are typically placed in administrative forbearance during the plan, so no payments are due outside it. The plan may provide for partial payments, interest-only payments, or full contractual payments to the servicer, depending on your disposable income and local court practice. You can still file an adversary proceeding during Chapter 13. If the court grants discharge, the loans are wiped out; if not, the remaining balance follows you after the plan ends.

Filing the Adversary Proceeding

Discharging student loans requires filing a Complaint to Determine Dischargeability inside your bankruptcy case. The complaint opens a separate adversary proceeding with its own case number.⁵ Despite common claims of a $350 fee, the federal court fee schedule waives the adversary proceeding filing fee when the debtor is the plaintiff.⁶ The real expense is attorney fees, which range from a few thousand dollars for a case that settles quickly to $20,000 or more for complex litigation that goes to trial.

After filing, you serve the complaint and summons on the defendants. For federal loans, that means serving the Department of Justice. Private lenders are served directly. General defendants have 30 days to respond; the United States gets 35 days.⁷ For federal loans, the parties usually ask the court to pause pretrial deadlines while the government reviews the Attestation Form. If the DOJ concludes hardship is established, the case ends with a stipulated discharge instead of a trial.

There is no filing deadline for a student loan adversary proceeding under 11 U.S.C. § 523(a)(8). You can bring the complaint at any time, and you can reopen a previously closed bankruptcy case to file it. The court cannot charge an additional filing fee for reopening.⁸

What to Gather

For federal loans, the Attestation Form is the centerpiece. It asks for your income, monthly expenses averaged over the last six months across categories like utilities, insurance, and food, your total outstanding student loan balance, and the origination date of each loan. The figures must line up with the schedules filed in your bankruptcy case. Beyond the form, pull together at least two years of tax returns, recent pay stubs, complete loan history showing every payment and any deferment or forbearance periods, and records of any income-driven repayment enrollment or applications.

For private loans, there is no standardized form. Your attorney builds the case through discovery and evidence, documenting the same hardship without the DOJ’s structured evaluation.

Partial Discharge

Courts are not limited to all-or-nothing. Most federal circuits recognize authority to grant a partial discharge, reducing your balance even if the facts do not support wiping it out entirely.² A court might discharge accrued interest while keeping the principal, or reduce the total to an amount the judge considers repayable. The Eighth Circuit’s Bankruptcy Appellate Panel has pushed back on this practice, but the majority rule permits it. Even a case that is not strong enough for a full wipe can end with a much smaller balance.

Alternatives Worth Checking First

Some federal discharge routes bypass bankruptcy entirely.

Total and Permanent Disability Discharge

If you are totally and permanently disabled, the Department of Education can discharge your Direct Loans, FFEL loans, and Perkins Loans. You qualify by providing documentation from one of three sources: a Department of Veterans Affairs determination of a 100 percent service-connected disability rating or total disability based on individual unemployability; Social Security Administration documentation showing SSDI or SSI benefits with qualifying review schedules; or certification from a licensed physician, nurse practitioner, physician assistant, or psychologist that you cannot engage in substantial gainful activity due to an impairment expected to last at least 60 continuous months or result in death.⁹

Closed School Discharge

If your school closed while you were enrolled, on an approved leave of absence, or within 180 days after you withdrew, you may qualify to have your loans canceled. You cannot have completed the program or a teach-out agreement at another institution.¹⁰ Borrowers who withdrew more than 180 days before closure due to exceptional circumstances may still qualify.

Income-Driven Repayment and Public Service Loan Forgiveness

Income-driven repayment caps federal loan payments at 10 to 20 percent of discretionary income and forgives any remaining balance after 20 to 25 years. Public Service Loan Forgiveness cancels the remaining balance after 120 qualifying payments while you work for a government or nonprofit employer. These programs do not eliminate debt immediately, but they may fit if your income is low but stable and you cannot clear the undue-hardship threshold.

Enrolling in income-driven repayment does not weaken a later bankruptcy case. Having enrolled and still being unable to maintain a basic standard of living strengthens it, and the DOJ guidance treats applying for income-driven repayment as evidence of good faith.²

Tax Treatment of a Bankruptcy Discharge

Student loan debt discharged through bankruptcy is not taxable income. Federal tax law excludes any debt canceled in a Title 11 bankruptcy case from gross income, and this is a permanent provision.¹¹

The distinction matters more in 2026 than it did a few years ago. The American Rescue Plan Act temporarily excluded all forgiven student loan debt from taxable income through December 31, 2025, and that exclusion has now expired.¹² Starting in 2026, debt forgiven through income-driven repayment after the 20- or 25-year period is generally treated as taxable cancellation-of-debt income. Debt forgiven through Public Service Loan Forgiveness, Total and Permanent Disability discharge, and closed school discharge remains tax-free. Bankruptcy discharge also remains tax-free under 26 U.S.C. § 108. If you are weighing bankruptcy against waiting out an income-driven plan, the tax difference can be significant.

1
Office of the Law Revision Counsel. 11 U.S. Code 523 – Exceptions to Discharge
2
United States Department of Justice. Guidance for Department Attorneys Regarding Student Loan Bankruptcy Litigation
3
United States Department of Justice. Student Loan Guidance
4
United States Department of Justice. Attestation of In Support of Request for Stipulation Conceding Dischargeability of Student Loans
5
United States Courts. What Is an Adversary Proceeding and How Do I File a Complaint
6
United States Courts. Bankruptcy Court Miscellaneous Fee Schedule
7
Legal Information Institute. Federal Rules of Bankruptcy Procedure Rule 7012 – Defenses
8
Office of the Law Revision Counsel. 11 USC App Rule 4007 – Determination of Dischargeability of a Debt
9
Federal Student Aid. Total and Permanent Disability Discharge
10
Federal Student Aid. Loan Discharge Application – School Closure
11
Office of the Law Revision Counsel. 26 USC 108 – Income From Discharge of Indebtedness
12
Taxpayer Advocate Service. What to Know About Student Loan Forgiveness and Your Taxes