Quick overview
Chapter 13 is a court-supervised repayment plan that lasts three to five years. Unlike Chapter 7, which may liquidate assets to pay creditors, Chapter 13 reorganizes debts around a debtor’s disposable income. Student loans are generally nondischargeable in bankruptcy (11 U.S.C. § 523(a)(8)), but the Chapter 13 structure still affects how you pay them, whether arrears can be caught up, and how federal borrower benefits are preserved.
Authoritative sources: U.S. Department of Education (studentaid.gov) and Consumer Financial Protection Bureau (consumerfinance.gov).
How Chapter 13 treats student loans (practical details)
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Non-dischargeability: Federal and most private student loans survive bankruptcy unless the debtor obtains an “undue hardship” ruling in an adversary proceeding (11 U.S.C. § 523(a)(8)). Many courts apply the Brunner test (Brunner v. New York State Higher Educ. Servs. Corp., 831 F.2d 395 (2d Cir. 1987)), which requires showing inability to maintain a minimal standard of living, persistence of that inability, and good-faith efforts to repay. Some circuits use a totality-of-the-circumstances test instead. (See studentaid.gov and federal bankruptcy case law.)
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Ongoing payments vs. plan treatment: If you’re current on your student loans when you file Chapter 13, most trustees and judges expect you to continue making direct payments to your loan servicer outside the bankruptcy plan. If you have prepetition arrears on student loans, the Chapter 13 plan can propose to cure those arrears over the 3–5 year plan term.
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Arrears and cure: Chapter 13 often allows borrowers to treat student loan arrears like unsecured debt arrears and catch them up as part of the plan. That does not erase the principal balance — it allocates the missed payments across the plan term so you avoid default and wage garnishment while keeping the underlying loan alive.
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Automatic stay and collections: Filing Chapter 13 triggers the automatic stay, which pauses most collection actions — phone calls, lawsuits, wage garnishments and, in most cases, levies — while your plan is on file. That gives breathing room to reorganize finances and stop immediate harms. (See Consumer Financial Protection Bureau guidance.)
What Chapter 13 cannot do for student loans
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It typically cannot discharge the balance of a student loan at the end of the plan unless a court has ruled that repaying the loan would impose an undue hardship.
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It cannot retroactively convert missed qualifying payments for federal forgiveness programs (like Public Service Loan Forgiveness) unless you continue to make qualifying payments directly to your servicer. Payments made through a Chapter 13 trustee generally do not count as qualifying payments for IDR/PSLF unless separately arranged and documented with the servicer (see studentaid.gov on PSLF). If you rely on loan forgiveness programs, discuss strategy with your attorney and servicer before filing.
Practical examples and typical plan scenarios
Example A — Current borrower, no arrears:
Sarah files Chapter 13 because of multiple unsecured creditors but is current on her federal student loans. Her plan pays other unsecured creditors a percentage of their claims; Sarah continues to make her regular student loan payments directly to her servicer. The automatic stay stops collection activity from other creditors and helps her avoid default on non-student obligations.
Example B — Borrower with arrears:
John has $15,000 in student loan arrears and medical debt. In Chapter 13, his plan proposes to cure the $15,000 arrears over five years while paying his current student loan payment directly. When John completes the plan, arrears will be brought current; the underlying student loan principal remains due after discharge of other eligible debts.
Example C — Seeking discharge via undue hardship:
Alex files Chapter 13 and brings an adversary proceeding asking the court to discharge student loans for undue hardship. The court applies the Brunner test (or local equivalent). If Alex cannot prove undue hardship, the loans survive. If Alex prevails, discharge of student loans is rare but possible.
How Chapter 13 affects federal benefits and programs
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Income-driven repayment (IDR) and Public Service Loan Forgiveness (PSLF): If you want to preserve eligibility for IDR and PSLF, you generally must keep the loan in a qualifying repayment status with the loan holder. Payments routed through the Chapter 13 trustee seldom qualify as payments under an IDR plan. To protect eligibility for forgiveness, continue making direct payments that qualify, and get written confirmation from your servicer. (U.S. Department of Education, studentaid.gov.)
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Forbearance, deferment, and administrative actions: Filing Chapter 13 may pause some administrative collection tools, but it doesn’t automatically restore elegibility for programs that require an active enrollment or specific payment plan. Check your servicer’s rules and the Department of Education guidance.
Steps to take before and after filing Chapter 13 (practical checklist)
- Inventory your student loans: federal vs. private, balances, payment status, servicer names, and repayment plan enrollment.
- Talk to a bankruptcy attorney experienced with student-loan issues; undue hardship litigation is an adversary proceeding and is technically and procedurally complex.
- Notify servicers and request current payoff/arrears statements. If you’re seeking to preserve PSLF/IDR eligibility, ask servicers to confirm what counts as a qualifying payment while in bankruptcy.
- Work with your attorney and trustee to decide whether student loan arrears should be cured through the plan or paid directly.
- Continue timely direct payments whenever possible — this preserves credit and loan program eligibility.
- After plan confirmation, maintain records of all payments and communications with your servicer. Keep proof of any continuing qualifying payments for forgiveness programs.
Common mistakes to avoid
- Assuming bankruptcy will erase student loans. Discharge is rare and requires an adversary proceeding proving undue hardship.
- Letting servicers lapse on reporting or failing to track payments made through the trustee versus direct payments — this can jeopardize IDR/PSLF credit.
- Not listing student loans correctly on bankruptcy schedules; omission can lead to disputes or sanctions.
- Filing without talking to a loan servicer or attorney; student-loan strategy is specific and can affect long-term outcomes.
How courts evaluate undue hardship (short primer)
Most courts use either the Brunner three-part test or a totality-of-the-circumstances approach to decide undue hardship in discharge actions. Under Brunner, a debtor generally must show:
- They cannot maintain a minimal standard of living for themselves and dependents if forced to repay the loans;
- This state of affairs is likely to persist for a significant portion of the repayment period; and
- They have made good-faith efforts to repay the loans.
Because tests vary by circuit, an experienced bankruptcy attorney in your jurisdiction is essential if you plan to pursue an undue hardship discharge.
Related resources on FinHelp
- For details on how bankruptcy and collection tools interact, see When Bankruptcy May Impact Federal Student Loan Collections: https://finhelp.io/glossary/when-bankruptcy-may-impact-federal-student-loan-collections/
- For myths and realities about student loan discharge in bankruptcy, read Bankruptcy and Student Loan Discharge: Realities and Myths: https://finhelp.io/glossary/bankruptcy-and-student-loan-discharge-realities-and-myths/
- For administrative discharge and non-bankruptcy options, see Bankruptcy vs Administrative Discharge: Student Loan Considerations: https://finhelp.io/glossary/bankruptcy-vs-administrative-discharge-student-loan-considerations/
Frequently asked questions
Q: Can I stop making student loan payments while in Chapter 13?
A: Generally no. You should continue making current payments directly to the servicer unless your plan specifically provides another arrangement and the servicer accepts it. Stopping payments can risk default and loss of federal benefits.
Q: Will Chapter 13 fix my credit?
A: Chapter 13 initially harms credit but can improve your situation over time by stopping collections and curing arrears. Completing a plan in good standing usually looks better than continuing to default.
Q: What is an adversary proceeding?
A: It’s a mini-lawsuit inside the bankruptcy case used to resolve contested issues — for student loans, it is the proceeding to seek discharge for undue hardship.
Professional disclaimer
This article is educational and not legal advice. For case-specific guidance, consult a qualified bankruptcy attorney and your student loan servicer. For federal program rules, see the U.S. Department of Education (https://studentaid.gov) and Consumer Financial Protection Bureau resources on student loans (https://www.consumerfinance.gov/).
Bottom line
Chapter 13 can be a valuable tool to reorganize household finances and cure student loan arrears, stop collection activity, and preserve asset ownership. But it rarely eliminates the underlying student loan balance. If you’re weighing Chapter 13, map out how the filing will interact with IDR, PSLF, and your servicer’s reporting practices, and get specialized legal advice before filing.
