Can You File Bankruptcy On Student Loans?

Student loan bankruptcy is possible, but unlike credit card or medical debt, student loans aren’t automatically discharged. Instead, you must complete a two-step legal process:

First, filing your main bankruptcy case (Chapter 7 or Chapter 13)

Then, filing a separate lawsuit called an adversary proceeding to prove you face “undue hardship.”

Historically, discharging student loans in bankruptcy has been challenging. But recent policy changes have increased the likelihood of success for federal student loan borrowers facing genuine financial hardship.

Have private loans? See our guide to discharging private student loans in bankruptcy.

The adversary proceeding is key to eliminating student loans. While your main bankruptcy case provides general financial relief, only the adversary proceeding — filed within that bankruptcy — can discharge student loan debt. Without this step, your student loans remain fully collectible after bankruptcy ends.

Think of bankruptcy like a two-stage rocket: the main case lifts you clear of most debts, but the adversary proceeding is essential to reach the final goal — freedom from student loans.

Here’s how you launch that rocket, in five steps:

Most borrowers seeking student loan discharge choose Chapter 7 bankruptcy. It’s faster (3–4 months), less expensive (about $1,000–$2,500 in attorney fees), and lets you quickly move on to the adversary proceeding—the lawsuit you need to discharge student loans.

Chapter 13 bankruptcy involves a longer (3–5 years) and more expensive process, with attorney fees typically between $3,000–$10,000. You make monthly payments managed by a court-appointed trustee, delaying your adversary proceeding and student loan discharge.

If your income is too high for Chapter 7, or you have significant assets to protect, Chapter 13 may be your only option. Otherwise, Chapter 7’s speed and cost advantages make it the best choice for most borrowers.

Related: What Happens to Student Loans in Chapter 13

Before filing your adversary proceeding, you’ll need to gather evidence documenting your financial hardship. Lenders will request these documents during discovery, and they’ll also form the basis of your adversary complaint.

Documents you’ll need:

• Pay stubs, bank statements, and household bills (past 12 months

• Tax returns and W-2 forms (past 5 years)

• Social Security Earnings Report

• Current resume and employment history

• Complete student loan statements

• Medical records (if health problems affect your finances)

Gathering these items upfront accomplishes two goals:

1. It streamlines discovery (the formal evidence exchange) when lenders inevitably request them.

2. It helps you build a strong, persuasive adversary complaint demonstrating your inability to repay loans while maintaining a basic standard of living.

Once your main bankruptcy is underway and you’ve gathered your documents, you’ll start the adversary proceeding by filing two key items with the court:

1. The complaint explains your financial story to the judge, including your income, debt balance, how the debt accumulated, and your efforts to repay. Most importantly, it requests that your student loans be fully or partially discharged.

2. The cover sheet provides administrative details that help court staff process your case. It’s procedural but required.

After filing, the court issues a summons officially notifying your lenders about the lawsuit. You must then serve copies of the summons and complaint to each lender, following specific legal procedures based on whether your loans are federal or private.

Related: How to File an Adversary Proceeding

Discovery begins after your lenders respond to your complaint (usually within 30 days). This phase involves exchanging evidence that shapes the outcome of your case.

First, you’ll attend a Rule 26(f) conference, where both sides agree on timelines, evidence-sharing rules, and discuss settlement options. This procedural meeting often indicates whether lenders are open to negotiation or plan to fight your discharge.

Discovery has three main parts:

1. Requests for Production of Documents: Each side exchanges relevant paperwork. Your lenders may ask for additional financial records, and you might request details about your loans and payment history.

2. Interrogatories: Both sides answer written questions under oath. Expect questions about your finances, employment potential, and efforts to repay your debt.

3. Requests for Admissions: Each party formally admits or denies specific statements. Be careful here. If you fail to respond clearly or on time (typically within 30 days), the court could treat statements as admitted, weakening your case significantly.

Discovery typically lasts several months and creates the evidence you’ll rely on for settlement negotiations or trial.

After discovery, settlement negotiations typically begin. How those negotiations unfold depends on whether your loans are federal or private.

Federal loans: Recent policy shifts have significantly improved settlement prospects. The Education Department will review your financial hardship evidence to determine if you’re eligible for full discharge, partial discharge, or no discharge at all. Many federal student loan adversary proceedings now resolve at this stage without needing trial.

Private loans: Traditional lump-sum settlements are uncommon. Instead, successful private loan settlements usually involve multi-year repayment plans at 0% interest, possibly including terms to release cosigners after completing payments. Partial discharge agreements with manageable payment terms are also common.

If you and your lender can’t agree on settlement terms, your case will proceed through either:

• Summary judgment: Each side asks the judge to decide the case based on written evidence only, without a courtroom trial. This is suitable when the dispute is about legal interpretations, not the facts themselves.

• Trial: Both sides present their case directly in court, allowing you to fully address factual disputes and make a detailed argument about your hardship.

Ultimately, the judge determines whether your student loans will be fully discharged, partially discharged, or remain collectible, based on whether you have proven undue hardship under your jurisdiction’s standard.

If your case ends successfully — through settlement or trial — your student loans will be discharged. But what does “discharge” actually mean?

In bankruptcy, “student loan discharge” means your debt is permanently wiped out, not just paused or lowered temporarily. Once discharged, your loans can’t be collected, sold, or transferred, and you won’t owe taxes on the forgiven amount.

This sets student loan discharge apart from most other debts handled in bankruptcy, like credit cards, medical bills, and some taxes. Those debts typically vanish automatically when your bankruptcy concludes. But student loans fall into a special category (alongside debts like child support or alimony) that requires an additional step to prove your hardship.

That’s why you need the adversary proceeding. Without it, your student loan balances survive bankruptcy, remain collectible, and continue accumulating interest.

To discharge student loans, you must prove “undue hardship.” Courts use one of two legal standards — The Brunner Test or The Totality of the Circumstances Test — to decide whether your hardship qualifies.

The Brunner Test (used in most jurisdictions)

The Brunner Test has three parts:

• Minimal standard of living: You can’t afford basic necessities like housing, food, healthcare, and transportation while repaying your loans.

• Long-term hardship: Your financial difficulties will likely continue for most of your repayment period—often due to disability, age, or industry shifts affecting your earning ability.

• Good faith effort: You’ve genuinely tried to repay your loans by negotiating with lenders, making payments when possible, or exploring repayment plans and deferment or forbearance options.

The Totality of the Circumstances Test (used in some jurisdictions)

This standard takes a broader view of your overall financial situation. Instead of specific elements, courts consider factors like your:

• Employment history and job prospects

• Income and living expenses

• Health conditions

• Family obligations

• Age and education

• Efforts you’ve made to repay or manage your loans

Related: How to Prove Undue Hardship for Student Loans

Even if you meet the criteria for undue hardship, outcomes can vary depending on the judge assigned to your case — even when the facts remain the same.

Some judges take a flexible view of “undue hardship,” recognizing that traditional standards were developed when student loan debts were much lower. These judges may factor in your debt-to-income ratio, age, and realistic job prospects.

Other judges stick to stricter interpretations and historical precedents. They often require evidence of severe, permanent disability or extraordinary circumstances before granting relief.

For example, a Virginia judge recently discharged student loans for a borrower struggling with long-term underemployment, despite sincere efforts to find better-paying work. A similar borrower in West Texas, however, had their discharge denied due to stricter standards requiring more severe hardship evidence.

Since 2022, new Department of Justice and Department of Education policies have led government attorneys to stop aggressively opposing cases where undue hardship is clear. These changes have improved consistency across jurisdictions, though individual judges still heavily influence final outcomes.

Judicial attitudes aren’t the only factor shaping your case outcome. The laws themselves—rooted in decades of policy decisions—also play a major role.

Related: The Judge Assigned to Your Case Matters

Student loans became difficult to discharge because Congress worried graduates would file bankruptcy shortly after finishing school to avoid repayment. Understanding this history helps clarify today’s challenges and explains recent policy shifts.

Starting in the 1970s, lawmakers gradually tightened restrictions:

• 1970s: First limits on student loan bankruptcy discharge

• 1998: Stricter “undue hardship” rules established

• 2005: Private loans gained the same tough protections as federal loans

The 2005 change was especially significant, placing nearly all student loans under the same tough discharge rules. Today, borrowers must show severe, lasting hardship regardless of loan type.

These rules were created when college costs and student debts were lower. Today’s borrowers face significantly larger debts, prompting recent policy efforts to update standards to reflect modern financial realities.

Related: When Did Student Loans Become Non-Dischargeable in Bankruptcy?

The student loan bankruptcy landscape has dramatically improved since 2022, creating new hope for borrowers who previously had little chance of discharge.

Legislative changes are still pending, but bipartisan momentum is building to relax strict bankruptcy standards. Recent proposals include the Student Borrower Bankruptcy Relief Act, the FRESH START Through Bankruptcy Act, and the Consumer Bankruptcy Reform Act. While not yet law, these bills show growing support for fairer treatment of struggling borrowers.

Executive branch actions have had immediate effects. In late 2022, the Departments of Education and Justice directed government attorneys to stop aggressively opposing bankruptcy cases where undue hardship is clear.

The impact has been significant. Previously, fewer than 1 in 1,000 borrowers successfully discharged student loans. But from late 2022 through early 2024, borrowers filed roughly 1,220 federal student loan adversary proceedings—far more than prior years—and achieved full or partial discharge in nearly 98-99% of cases. This marks a dramatic reversal from decades of near-guaranteed defeat.

Even as broader legislative reform awaits passage, student loan bankruptcy has already become a realistic pathway to relief for borrowers who can prove undue hardship.

Student loan bankruptcy is complex, but recent policy shifts have dramatically improved your chances of success. Still, proving undue hardship requires specialized legal knowledge and careful presentation of your case.

If you’re overwhelmed by student debt and wondering if bankruptcy is right for you, speaking with an experienced attorney can clarify your options and maximize your odds of discharge.

Book a call with one of our student loan bankruptcy lawyers.

Related:

• Can You Get Student Loans While in Chapter 13?

• Are Student Loans Consumer Debt?

• Can Parent PLUS Loan Be Discharged in Bankruptcy?

• Can You File Bankruptcy On Sallie Mae Student Loans?

• Student Loan Bankruptcy and Cosigners