Student loans can be included in bankruptcy, but they are almost never discharged unless you prove undue hardship

You can list student loans on a bankruptcy petition. The question is whether the court will erase them. Federal law makes student loan debt exceptionally difficult to discharge — much harder than credit card debt, medical bills, or personal loans. To remove student loans through bankruptcy, you must file a separate lawsuit called an adversary proceeding and convince a judge that repaying the loans would cause you undue hardship. Courts rarely grant this. Most people who file bankruptcy still owe their student loans after the case closes.

The distinction matters because filing bankruptcy stops collection calls and lawsuits on other debts, but student loan servicers can continue collection efforts even after your bankruptcy case ends — unless you win the hardship argument. Understanding what "undue hardship" actually means in your court, and what evidence judges require, is the practical starting point.

Key Takeaways

  • Student loans appear on your bankruptcy petition but are not automatically erased; you must file a separate adversary proceeding and prove undue hardship to a judge.
  • The standard for undue hardship varies by federal court circuit, but most require you to show you cannot maintain a minimal standard of living, your situation is likely to persist, and you made good-faith repayment efforts.
  • Federal student loans have income-driven repayment plans that may lower your monthly payment to as little as $0, which courts consider before granting hardship discharge.
  • Private student loans are easier to discharge in bankruptcy than federal loans, though still difficult, because they lack the same legal protections.
  • Filing bankruptcy stops collection calls on all debts, but student loan servicers can resume collection after your case closes unless you win the hardship claim.

What "undue hardship" means in bankruptcy court

The legal test for discharging student loans is called the Brunner test, used in most federal courts. It has three parts. First, you must show you cannot pay the loan and maintain a minimal standard of living — not a comfortable life, but basic necessities like food and shelter. Second, your financial situation must be likely to continue for most of the loan repayment period, not just temporarily. Third, you must have made a good-faith effort to repay the loans, usually meaning you tried income-driven repayment plans or requested forbearance or deferment.

Some federal courts use a different test called the totality of circumstances approach, which is slightly more flexible but still requires substantial hardship. A few courts have adopted the Mechanical Brunner test, which is stricter. Which test applies depends on which federal court district handles your case — this is determined by where you live or file, not by you.

Judges rarely find undue hardship. Reported cases show discharge rates between 0.1 and 0.3 percent of all bankruptcy filers who attempt it. Courts reason that student loans are meant to be repaid, that income-driven plans already reduce payments for low earners, and that hardship can be temporary while loans last decades. You need evidence beyond saying you are struggling: medical records showing permanent disability, documentation of job loss with no realistic prospect of recovery, or proof that you have exhausted income-driven options.

How federal and private student loans are treated differently

Federal student loans — Direct Loans, FFEL loans, and Perkins Loans — receive the strongest legal protection against discharge. Congress wrote this protection into law specifically to protect the federal lending program. Private student loans, issued by banks and credit unions, do not have the same statutory shield. They can be discharged in bankruptcy more readily, though still not easily.

For federal loans, you must file the adversary proceeding. For private loans, some courts treat them like any other unsecured debt, meaning you may be able to discharge them without proving undue hardship — but this depends on your court and the specific loan contract. Before filing, ask a bankruptcy attorney whether your private lender has contractual language that mimics federal protections. Some do.

Parent PLUS loans, which are federal loans taken out by parents to fund a child's education, follow the same undue hardship rules as other federal loans. They do not discharge more easily just because a parent borrowed them.

Income-driven repayment plans and what courts expect you to try first

Federal student loans have four income-driven repayment plans: Income-Based Repayment (IBR), Pay As You Earn (PAYE), Revised Pay As You Earn (REPAYE), and Income-Contingent Repayment (ICR). Under these plans, your monthly payment is calculated as a percentage of your discretionary income — typically 10 to 20 percent — and can be as low as $0 if your income is below the poverty line for your household size.

Courts view these plans as a reason to deny hardship discharge. A judge will ask: if your payment can be $0 under income-driven repayment, how is repayment causing undue hardship? To overcome this, you must show you enrolled in an income-driven plan, made payments under it, and still cannot meet basic living expenses. You also need to show that even after 20 or 25 years of payments under the plan, you will still owe a substantial balance — meaning forgiveness at the end of the repayment term will not solve your problem.

If you have not enrolled in an income-driven plan before filing for bankruptcy, courts will often dismiss your hardship claim and tell you to try that route first. This is a major reason why hardship discharge is rare: the plans themselves are designed to make loans affordable for low earners.

What happens to your student loans if bankruptcy is filed

When you file for bankruptcy, an automatic stay goes into effect immediately. This stops collection calls, wage garnishment, and lawsuits on all debts, including student loans. Your loan servicer must pause collection efforts. This breathing room can last months while your bankruptcy case proceeds.

However, the automatic stay does not erase student loans. If you do not file an adversary proceeding to challenge the debt, your loans remain on your bankruptcy schedule as debts you still owe. When your bankruptcy case closes — typically 3 to 5 years for Chapter 13 and a few months for Chapter 7 — the automatic stay lifts. Your servicer can then resume collection, including wage garnishment, offset of tax refunds, and Social Security benefits (for federal loans).

If you do file an adversary proceeding and lose, you are in the same position: the loans survive bankruptcy. If you win, the court enters an order discharging the debt, and your servicer must stop collection permanently. You will receive a notice of discharge, and the loan will be marked as discharged on your credit report.

The cost and timeline of filing an adversary proceeding

Filing an adversary proceeding requires a bankruptcy attorney. The court filing fee is $350, but attorney fees are the larger cost. Most attorneys charge between $1,500 and $5,000 to file and litigate an adversary proceeding, depending on complexity and whether the case goes to trial. Some attorneys work on contingency or reduced fees if they believe the case is strong, but this is not common.

The timeline varies. If the servicer does not contest your claim, the case may be resolved in a few months. If the servicer files a response and the case goes to trial, it can take a year or more. During this time, your bankruptcy case may be closed, meaning the automatic stay has lifted and collection can resume — though most servicers pause collection while an adversary proceeding is pending.

Before spending money on an adversary proceeding, discuss with your attorney whether your situation meets the hardship test in your circuit. An attorney can review your income, expenses, and loan balance and give you a realistic assessment of your chances. Many people find that income-driven repayment or loan forgiveness programs (for federal loans) are more practical routes than bankruptcy.

Alternatives to bankruptcy for managing student loan debt

If you have federal student loans, explore income-driven repayment plans before filing for bankruptcy. These plans cap your payment at a percentage of discretionary income and forgive remaining balance after 20 to 25 years. For borrowers with low income, the payment is often $0. This is a free option run by your loan servicer.

Public Service Loan Forgiveness (PSLF) erases federal loans after 120 may have access to payments if you work for a government agency or nonprofit. Teacher Loan Forgiveness erases up to $17,500 for teachers in low-income schools. Permanent Disability Discharge erases federal loans if you are totally and permanently disabled. These programs do not require bankruptcy and do not damage your credit.

For private loans, options are more limited. Some lenders offer hardship programs, forbearance, or deferment. Contact your lender directly. If you are considering bankruptcy primarily because of student loans, ask your attorney whether discharging other debts (credit cards, medical bills) through Chapter 7 would free up enough income to make student loan payments manageable.

Frequently Asked Questions

Will filing bankruptcy stop my student loan payments?

The automatic stay stops collection efforts temporarily, but your loans are not erased unless you win an adversary proceeding. Once your bankruptcy case closes, collection resumes. Filing bankruptcy does not lower your payment or change your loan terms unless you also file an adversary proceeding and prove undue hardship.

Can I discharge private student loans more easily than federal loans?

Yes, private loans lack the statutory protection of federal loans and may be discharged without proving undue hardship in some courts. However, this depends on your court and the loan contract. Ask a bankruptcy attorney in your district whether private loans are treated differently. Even if easier, discharge is not may provide.

What if I have already tried income-driven repayment and still cannot afford my loans?

Document your enrollment, your payment history, and your current income and expenses. Show the court that even at $0 or a minimal payment, you cannot meet basic living costs and that your situation is unlikely to improve. This strengthens a hardship claim, though courts still rarely grant discharge. Discuss your specific circumstances with a bankruptcy attorney.

Do I have to file an adversary proceeding, or does the court automatically consider discharging my student loans?

You must file an adversary proceeding yourself or through your attorney. The court does not automatically consider discharging student loans. If you do not file, your loans remain on your bankruptcy schedule and survive the case. Filing requires a separate lawsuit and additional attorney fees.

Can Parent PLUS loans be discharged in bankruptcy?

Parent PLUS loans follow the same undue hardship rules as other federal loans. You must file an adversary proceeding and prove hardship. They are not discharged more easily because a parent borrowed them. Courts apply the same Brunner test or totality of circumstances test.