To file bankruptcy on student loans, you file a Chapter 7 or Chapter 13 case the usual way, then open a separate lawsuit inside that case called an adversary proceeding and ask the bankruptcy judge to discharge the loans on the ground that repaying them would be an undue hardship.1Office of the Law Revision Counsel. 11 U.S. Code 523 – Exceptions to Discharge Student loans do not vanish on their own when a judge grants a standard discharge. Credit cards and medical bills do; educational debt is carved out by 11 U.S.C. § 523(a)(8) and survives unless you take this extra step and win it.
Step One: File the Underlying Bankruptcy Case
The adversary proceeding only exists inside an active bankruptcy case, so you need the main case first. Either chapter works. Chapter 7 moves quickly and the adversary proceeding runs alongside the liquidation. Chapter 13 stretches over a three-to-five-year repayment plan, which can actually help you: more time to build a payment history that supports the good-faith element of undue hardship.
Nothing about the main filing itself discharges the loans. Treat the main case as the container and the adversary proceeding as the real fight.
Step Two: Build the Undue Hardship Case Before You File the Lawsuit
Undue hardship is the legal standard you have to meet, and the evidence you assemble before filing drives everything that comes after. Which test the court applies depends on your federal circuit.
Brunner (Most Circuits)
Most circuits use the three-part test from Brunner v. New York State Higher Education Services Corp.2Justia. Brunner v. New York State Higher Education Services Corp. You have to satisfy all three at once:
- You cannot maintain a minimal standard of living for yourself and your dependents if forced to repay.
- Your financial situation is likely to persist for a significant portion of the repayment period, from causes like chronic illness, permanent disability, or an age and career path that make meaningful income growth unlikely.
- You made good-faith efforts to repay, which courts measure through payment history, enrollment in income-driven plans, and attempts to negotiate with the servicer.
Brunner has a reputation for being harsh, and that reputation is largely earned, particularly on the second prong. Outcomes still vary by judge.
Totality of the Circumstances (Eighth Circuit and Most of the First)
The Eighth Circuit rejected Brunner. Most bankruptcy courts in the First Circuit follow the same approach. The judge weighs your household budget, earning capacity, assets, loan terms, and any other relevant facts without forcing them into three rigid prongs. You still carry the burden of proof, but the analysis is more flexible.
What to Document
Vague financial complaints lose. Detailed records win. Gather several years of tax returns, recent pay stubs, and bank statements that show your actual cash flow. Build an itemized monthly expense breakdown covering housing, utilities, food, transportation, medical costs, and dependent care. The point is to show that nothing is left after necessary living expenses. Padding expenses or hiding income will destroy your credibility, and the lender’s attorneys will look.
For the persistent-hardship element, medical records documenting chronic conditions or disabilities carry significant weight. A vocational expert’s report on your future earning capacity can establish that your current income is a realistic ceiling rather than a temporary dip. Employment rejection letters, failed job searches, and retraining efforts all help.
For good faith, request your full loan payment history from the servicer, keep records of any income-driven repayment enrollment, and save correspondence with your lender. Small payments made consistently over years often read as better good-faith evidence than sporadic larger ones.
Step Three: File the Adversary Proceeding
The adversary proceeding is a lawsuit filed inside your existing bankruptcy case. The complaint has to identify each loan you want discharged, name the lender or servicer as the defendant, and lay out the specific facts supporting undue hardship. Most bankruptcy courts post complaint forms on their websites.3Federal Student Aid. Discharge in Bankruptcy Attorneys file through the court’s Electronic Case Filing system; self-represented borrowers can file in person at the clerk’s office.
The usual $350 adversary filing fee does not apply when the debtor is the plaintiff, so you typically pay nothing to open the proceeding.4United States Courts. Bankruptcy Court Miscellaneous Fee Schedule
Serve the Complaint on the Right Parties
After filing, you have to formally serve the complaint and summons. For private lenders, use a process server or certified mail. For federal loans, you are suing a federal agency, and Rule 7004 requires service on three parties: the loan holder (typically the Department of Education), the civil-process clerk at the U.S. Attorney’s office in your district, and the Attorney General of the United States in Washington, D.C.5Legal Information Institute. Federal Rules of Bankruptcy Procedure Rule 7004 – Process; Issuing and Serving a Summons and Complaint Improper service can delay the case for months or get the complaint dismissed. If you are filing without an attorney, the clerk’s office can usually point you to the exact addresses and procedures in your district.6United States Bankruptcy Court. Student Loan Discharge Adversary Proceeding – Special Service Rules
Step Four: Submit the DOJ Attestation (Federal Loans)
A 2022 initiative by the Department of Justice and Department of Education set up a standardized process that has changed how federal loan discharge cases play out.7Department of Justice. Student Loan Guidance Instead of fighting every discharge request, government attorneys now evaluate cases using an attestation form and can recommend full or partial discharge when the numbers support it.
The form asks for your adjusted gross income and a monthly expense breakdown. The DOJ measures your expenses against thresholds derived from the IRS Collection Financial Standards.8United States Department of Justice. Attestation in Support of Request for Stipulation Conceding Dischargeability of Student Loans The 2025 form sets total basic living expenses (food, housekeeping, clothing, personal care, and miscellaneous) at $839 per month for a single-person household and $2,129 for a household of four, plus separate allowances for uninsured medical costs.
If the Assistant U.S. Attorney reviewing your case concludes that your attestation shows undue hardship, the government can stipulate to a discharge without trial. The attestation goes to the AUSA, not the bankruptcy court, unless the court directs otherwise.8United States Department of Justice. Attestation in Support of Request for Stipulation Conceding Dischargeability of Student Loans Private lenders are not bound by any of this.
What Happens After You File
Once properly served, the defendant has 30 days from the date the summons was issued to answer the complaint.9Office of the Law Revision Counsel. Federal Rules of Bankruptcy Procedure Rule 7012 – Defenses and Objections For federal loans, this is when the AUSA reviews your attestation and loan records and decides whether to contest or concede.
If no stipulation resolves the case, discovery begins. Both sides exchange documents. Expect requests for updated bank statements and employment records, and possibly a deposition where you answer questions under oath about income, spending, and job prospects. Discovery can run several months.
The case ends in one of a few ways:
- Full discharge, erasing the entire balance plus accrued interest and fees.
- Partial discharge, reducing principal, lowering the interest rate, or both.
- Modified repayment terms, such as an extended period or restructured payments.
- Stipulated judgment, where the government or lender agrees to discharge or modification without trial. These have become more common since the 2022 DOJ guidance.7Department of Justice. Student Loan Guidance
- Denial, meaning the full loan obligation survives bankruptcy.
A full or partial discharge triggers the permanent injunction under 11 U.S.C. § 524, which bars the lender from any further collection on the discharged amount, including calls, letters, lawsuits, wage garnishment, and tax refund seizure.10Office of the Law Revision Counsel. 11 U.S. Code 524 – Effect of Discharge
Some Private Loans Do Not Need the Adversary Proceeding
Before you commit to the whole process, check whether your private loans even qualify as protected educational debt. The Consumer Financial Protection Bureau has clarified that some loans borrowers think of as “private student loans” fall outside § 523(a)(8) and can be discharged in a standard bankruptcy.11Consumer Financial Protection Bureau. Busting Myths About Bankruptcy and Private Student Loans These include:
- Loans in amounts exceeding the school’s cost of attendance, particularly when paid directly to the borrower.
- Loans for schools not eligible for Title IV federal funding, including unaccredited colleges and training programs.
- Bar exam and professional exam loans for prep fees and living expenses.
- Residency loans covering fees, living expenses, and moving costs for medical or dental residency.
- Loans to students attending school less than half-time.
If your loan fits one of these, you may not need to prove undue hardship at all. Worth checking with a bankruptcy attorney before assuming you are stuck with the full adversary route.
Co-signers Stay on the Hook
Your discharge does not release a co-signer. The lender can pursue the co-signer for the full balance unless that person files their own bankruptcy and separately proves undue hardship on their own facts.
Chapter 13 offers co-signers temporary protection through the co-debtor stay under 11 U.S.C. § 1301, which blocks collection against a co-signer while the Chapter 13 case is active.12Office of the Law Revision Counsel. 11 U.S. Code 1301 – Stay of Action Against Codebtor Chapter 7 gives no such protection. When a Chapter 13 case closes or converts to Chapter 7, the stay lifts and collection against the co-signer resumes. Lenders can also ask the court to lift the stay during the case if the plan does not propose to pay the loan in full, or if the co-signer actually received the education. Tell your co-signer before you file.
Tax Treatment of a Bankruptcy Discharge
Canceled debt is usually taxable income, but debt discharged in a Title 11 bankruptcy case is excluded from gross income under 26 U.S.C. § 108(a)(1)(A), and that exclusion covers student loans.13Office of the Law Revision Counsel. 26 U.S. Code 108 – Income From Discharge of Indebtedness You will not owe federal income tax on a balance erased through a bankruptcy adversary proceeding.
This matters because the American Rescue Plan Act’s broader exclusion for student loan forgiveness only covers forgiveness through the end of 2025.14Taxpayer Advocate Service. What to Know About Student Loan Forgiveness and Your Taxes Starting in 2026, forgiveness through income-driven repayment or other administrative programs may generate a tax bill. The bankruptcy exclusion under § 108 is permanent.
Alternatives to Try First
The adversary proceeding is demanding and uncertain. Before filing, check whether administrative options provide enough relief on their own.
Federal borrowers can enroll in income-driven repayment plans that cap payments at a percentage of discretionary income. Income-Based Repayment sets payments at 10% to 15% of discretionary income; Pay As You Earn caps them at 10%. After 20 to 25 years of qualifying payments, the remaining balance is forgiven. A new Repayment Assistance Plan is scheduled to replace most existing IDR plans by July 2028, and these plans will not be available for new loans issued on or after July 1, 2026. Downside: starting in 2026, the forgiven balance under IDR may be taxable, unlike the bankruptcy exclusion.
Even if you ultimately file the adversary proceeding, enrolling in IDR and making the calculated payments strengthens the good-faith element. If your IDR payment is $0 because your income is low enough, that itself supports the argument that repayment is unsustainable.
If your school closed while you were enrolled, while you were on an approved leave of absence, or within 180 days after you withdrew, you may qualify for a federal closed school discharge without proving hardship.15Federal Student Aid. Closed School Discharge For schools that closed on or after July 1, 2023, the discharge generally happens automatically one year after the official closure date. Completing the program at the closed school or finishing through a teach-out agreement disqualifies you; transferring some credits to a different school does not.