Can bankruptcy discharge student loans?

Bankruptcy can clear many kinds of consumer debt, but student loans are treated differently. Under current U.S. law (11 U.S.C. § 523(a)(8)), federal and most private student loans remain nondischargeable unless a borrower proves “undue hardship” in a separate court action called an adversary proceeding. Courts use different tests to decide undue hardship (most commonly the Brunner test or a totality-of-the-circumstances approach), and outcomes depend heavily on individual facts and the jurisdiction hearing the case.

Sources: 11 U.S.C. § 523(a)(8) (statute); U.S. Department of Education (StudentAid.gov); Consumer Financial Protection Bureau (CFPB).

Background and how we got here

Over several decades courts and Congress shaped how student loans are handled in bankruptcy. The core statutory rule is 11 U.S.C. § 523(a)(8), which creates an exception to discharge for “an educational benefit overpayment or loan made, insured, or guaranteed by a governmental unit, or made under any program funded in whole or in part by a governmental unit, or a private educational loan” unless excepting the debt “would impose an undue hardship on the debtor and the debtor’s dependents.” (See the statute text and summaries at the U.S. Department of Education and legal resources such as Cornell’s Legal Information Institute.)

Case law then developed practical tests for judges to follow. The most widely cited is the Brunner test (Brunner v. New York State Higher Education Services Corp., 831 F.2d 395, 2d Cir. 1987), which asks whether:

• the debtor cannot maintain a minimal standard of living if forced to repay the loans;
• additional circumstances indicate the state of affairs is likely to persist for a significant portion of the repayment period; and
• the debtor has made good-faith efforts to repay the loans.

Other circuits apply a “totality of the circumstances” test instead. Because circuits differ, two debtors with similar facts can see different outcomes depending on where they file.

How bankruptcy and student loan discharge actually work

1. Filing a bankruptcy case (Chapter 7 or Chapter 13)

• Chapter 7: Liquidation. If eligible, non-exempt assets are sold and many unsecured debts are discharged. Student loans generally survive discharge unless the adversary proceeding succeeds.
• Chapter 13: Reorganization. You propose a 3–5 year repayment plan. Student loans usually remain outside the plan (not fully discharged) but you may gain breathing room, automatic stay protection, and structured monthly payments while you reorganize other debts.

1. Adversary proceeding: the required step

• To seek student loan discharge you must file an adversary proceeding within your bankruptcy case. This is a separate lawsuit in the bankruptcy court that asks the judge to declare the student loan dischargeable for undue hardship.

1. Burden of proof and evidence

• The debtor carries the burden to prove undue hardship by a preponderance of the evidence. Documentation is critical: tax returns, pay stubs, medical records, statements of monthly living costs, proof of good-faith attempts to repay (payment history, loan servicer communications), and expert testimony (when appropriate).

1. Judge decides using applicable test

• The judge applies the Brunner test or the totality test depending on the circuit and case law. Outcomes vary: some debtors have partial discharges (rare), some achieve full relief, and many are denied.

Author’s note: In my practice I’ve seen adversary proceedings succeed when the borrower had long-term disability, stable but very low income, and medical records showing a permanent inability to work. I’ve also seen denials where temporary job loss or poor budgeting were the main issues.

Real-world scenarios

• Example A — The chronic disability case: A borrower with a permanent disability and very limited earning capacity documented by medical records may meet undue hardship because the condition makes repayment impossible for the foreseeable future.

• Example B — High-income denial: A borrower with steady, substantial income but large discretionary spending is unlikely to meet undue hardship, even if debt-to-income ratios look strained.

• Example C — Chapter 13 as a bridge: A borrower who needs time to stabilize income may use Chapter 13 to strip unsecured debt and make student-loan payments manageable under court supervision; this won’t automatically discharge the loans but can stop collection while reorganizing.

Who is most affected or eligible to try?

• Borrowers with long-term, severe reductions in earning capacity (disability, chronic illness).
• Older borrowers near retirement with high unpaid balances relative to income and assets.
• Borrowers with unpredictable employment prospects or legitimate, documented inability to earn.

Not typically eligible: recent graduates with high balances but normal earning prospects, people who have not tried available repayment or deferment options, or those with voluntary underemployment without medical or other compelling causes.

Practical strategies and professional guidance

• Exhaust administrative options first: Explore income-driven repayment plans, Public Service Loan Forgiveness (PSLF) if applicable, consolidation, deferment/forbearance, and loan rehabilitation. The U.S. Department of Education’s StudentAid site and the CFPB are primary resources for federal loan options.

• Document thoroughly: If you plan an adversary proceeding, compile at least 2–3 years of tax returns, pay stubs, bank statements, medical records, a month-by-month budget, and correspondence with loan servicers.

• Hire experienced counsel: Effective adversary proceedings usually require a bankruptcy attorney familiar with student loan litigation. In my experience, attorneys who prepare clear evidence of persistence of hardship and good-faith repayment efforts achieve better outcomes.

• Consider Chapter selection strategically: Chapter 7 can be faster, but Chapter 13 gives time and may make a challenging financial profile manageable while an adversary action proceeds.

• Use bankruptcy to rearrange priorities: Even when loans aren’t discharged, bankruptcy can stop garnishment, discharge other unsecured debts, and rebuild credit over time.

Common myths and mistakes

• Myth: “Filing bankruptcy will wipe out my student loans.” Reality: Not usually. You must prove undue hardship in court.

• Mistake: Not pursuing income-based repayment, PSLF, or other relief before bankruptcy. Some borrowers miss easier solutions.

• Mistake: Failing to collect and organize evidence before filing. Poor documentation weakens adversary cases.

Short FAQ

• Can federal student loans ever be discharged in bankruptcy? Yes, but only if you win an adversary proceeding by proving undue hardship under 11 U.S.C. § 523(a)(8).

• How do judges measure “undue hardship”? Many follow the Brunner test (minimal standard of living, persistence of circumstances, good-faith efforts to repay) or a totality-of-the-circumstances analysis.

• Is private student loan discharge easier? No — private loans are also governed by § 523(a)(8) and are often equally difficult, though local case law varies.

Helpful internal resources

• See our guide on when bankruptcy can discharge loan debt: When Bankruptcy Can Discharge Loan Debt.

• Learn the differences between Chapter 7 and Chapter 13 here: Chapter 7 Bankruptcy Explained and Chapter 13 Bankruptcy Explained.

• Additional discussion of loan forgiveness and discharge: Loan Forgiveness and Discharge: When Bankruptcy May Lead to Loan Discharge.

Professional disclaimer

This article is educational and reflects general principles of U.S. bankruptcy and student loan law as of 2025. It is not legal advice. Consult a licensed bankruptcy attorney or certified financial planner about your specific situation.

Authoritative sources

• U.S. Department of Education — Federal Student Aid: https://studentaid.gov
• Consumer Financial Protection Bureau — Student loans and bankruptcy resources: https://www.consumerfinance.gov
• U.S. Code, 11 U.S.C. § 523(a)(8) (student loan discharge exception): https://www.law.cornell.edu/uscode/text/11/523

If you want, I can help you prepare a document checklist for an adversary proceeding or review repayment options that may be faster and less costly than filing bankruptcy.