Student loans are rarely discharged in bankruptcy, but it is possible under specific circumstances

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 differently from credit card debt or medical bills — bankruptcy law assumes you can repay them even if your other debts are wiped out. To discharge student loans (meaning the debt is erased), you must prove undue hardship to the bankruptcy court, a legal standard that is difficult to meet and varies by court.

The process is not automatic. You file for bankruptcy through the normal channels, but then you file a separate lawsuit called an adversary proceeding asking the court to discharge the student loans specifically. Most people who file for bankruptcy keep their student loans and continue paying them after the bankruptcy is complete.

Key Takeaways

  • Student loans survive bankruptcy unless you file a separate lawsuit proving undue hardship to the court.
  • Undue hardship has no single definition — courts in different regions use different tests, and the standard is intentionally strict.
  • You must file an adversary proceeding in the bankruptcy court; the loans are not automatically considered for discharge.
  • Even if you win, only the student loans are discharged — your other debts are handled through the regular bankruptcy process.
  • Income-driven repayment plans and loan forgiveness programs may offer a path forward without bankruptcy.

What "undue hardship" means and why courts rarely find it

The term undue hardship is intentionally vague, and different federal courts interpret it differently. The most common test, used in many circuits, asks whether you can maintain a minimal standard of living if forced to repay the loans. This means the court is looking at whether you have enough money left over after basic expenses — food, housing, utilities, medical care — to pay something toward the student loans.

Courts also consider whether your hardship is likely to continue for most of the repayment period. A temporary job loss or illness that you are expected to recover from usually does not meet the standard. The hardship must appear to be long-term or permanent — disability, chronic illness, or a permanent reduction in earning capacity.

Some courts also weigh whether you made a good-faith effort to repay the loans before filing for bankruptcy. If you never looked into income-driven repayment plans, never contacted your loan servicer, or never explored deferment or forbearance options, a court may view you as not having exhausted your options.

How to file an adversary proceeding for student loan discharge

An adversary proceeding is a lawsuit filed within your bankruptcy case. You do not file it at the same time as your bankruptcy petition — you file it after your bankruptcy case is already open. The process requires filing a complaint in the bankruptcy court, naming your loan servicer or the Department of Education as the defendant, and presenting evidence of your hardship.

You will need to document your income, expenses, assets, and the nature of your hardship. Medical records, employment history, and letters from doctors or employers may be necessary. The loan servicer or the Department of Education will respond and argue against discharge, and the court will hold a hearing where both sides present evidence.

This process is expensive and time-consuming. You will likely need a bankruptcy attorney, and attorney fees for an adversary proceeding can range significantly depending on your case's complexity and your location. Many bankruptcy attorneys handle the initial bankruptcy filing but charge separately for an adversary proceeding, or may decline to take it on at all.

Different courts use different standards for undue hardship

The federal court system is divided into circuits, and each circuit has developed its own interpretation of undue hardship. The most widely used test is the Brunner test, which asks: (1) Can you maintain a minimal standard of living if forced to repay? (2) Is this hardship likely to persist for a significant portion of the repayment period? (3) Have you made a good-faith effort to repay?

Other circuits use different frameworks. Some courts apply a more flexible totality of circumstances test that weighs all factors without a rigid checklist. A few courts have adopted the Totality of Circumstances test from the American Bankruptcy Institute, which considers factors like age, income, expenses, health, and family situation without requiring you to meet all three prongs.

Which test applies to you depends on which federal circuit your bankruptcy court is in. Your bankruptcy attorney can tell you which standard your court uses and whether your situation is likely to meet it.

What happens to your student loans if bankruptcy is not discharged

If you file for bankruptcy and do not pursue an adversary proceeding, or if you pursue one and lose, your student loans remain after the bankruptcy is complete. However, bankruptcy does affect how you repay them. If you file Chapter 7 bankruptcy, your other debts are wiped out, which may free up money in your budget to put toward student loans. If you file Chapter 13 bankruptcy, your student loans are typically not included in the repayment plan, but again, eliminating other debts may make them more manageable.

After bankruptcy, you can enroll in an income-driven repayment plan if you have federal loans. These plans cap your monthly payment at a percentage of your discretionary income — often 10 to 20 percent — and forgive any remaining balance after 20 to 25 years of payments. For many borrowers, this is a more realistic path than proving undue hardship in court.

Income-driven repayment and forgiveness as alternatives to discharge

Before pursuing bankruptcy and an adversary proceeding, explore whether an income-driven repayment plan makes your federal student loans manageable. These plans recalculate your payment based on your current income and family size, not the original loan amount or standard 10-year repayment schedule. If your income is very low, your payment could be $0 per month.

Federal loans on income-driven plans also may have access to for Public Service Loan Forgiveness if you work for a government agency or may have access to nonprofit, with forgiveness after 10 years of payments. Even without PSLF, any remaining balance is forgiven after 20 to 25 years, depending on the plan.

Private student loans do not have income-driven options and cannot be discharged through income-based forgiveness. If your debt is primarily private loans, bankruptcy may be worth exploring more seriously, though the undue hardship standard still applies.

When bankruptcy might make sense despite student loan survival

Bankruptcy can still be useful even if your student loans are not discharged. If you carry significant credit card debt, medical debt, or other unsecured debt alongside student loans, bankruptcy eliminates those debts and frees up money in your monthly budget. With other debts gone, you may be able to afford an income-driven repayment plan or even accelerated repayment of the student loans.

Bankruptcy also stops collection calls and lawsuits from other creditors, gives you a fresh start on your credit, and provides a legal framework for managing debt you cannot pay. The student loans remain, but the overall financial picture may improve enough to make the bankruptcy filing worthwhile.

A bankruptcy attorney can review your full financial situation and tell you whether filing makes sense in your case, whether or not the student loans themselves are likely to be discharged.

Frequently Asked Questions

Will filing for bankruptcy hurt my student loan repayment?

Bankruptcy does not automatically make student loans harder to repay. If you file Chapter 7, your other debts disappear, potentially freeing up money for student loans. If you file Chapter 13, you make a repayment plan for other debts while student loans are handled separately. After bankruptcy, you can enroll in income-driven repayment if you have federal loans.

Can private student loans be discharged in bankruptcy?

Private student loans are subject to the same undue hardship standard as federal loans. They do not automatically survive bankruptcy the way federal loans do, but courts still rarely discharge them. You must file an adversary proceeding and prove undue hardship, just as with federal loans.

What if I have already defaulted on my student loans?

Default does not change the bankruptcy process. Your loans are still treated as non-dischargeable unless you prove undue hardship. Filing for bankruptcy does stop collection activity and wage garnishment while your case is pending, which can give you breathing room to explore repayment options.

How much does it cost to file an adversary proceeding for student loan discharge?

Costs vary by location and attorney. Filing fees to the court are typically a few hundred dollars, but attorney fees are the larger expense. Some attorneys charge a flat fee for an adversary proceeding, while others charge hourly rates. Many bankruptcy attorneys will not take on an adversary proceeding unless they believe undue hardship can be proven.

Can I discharge parent PLUS loans or federal loans I took out for graduate school?

Yes, all federal student loans are subject to the same undue hardship standard, including Parent PLUS loans and graduate school loans. The type of loan does not matter — only whether you can prove undue hardship to the court.