Does bankruptcy get rid of student loans? The short answer is: rarely, but not never. Unlike most other debts, federal student loans are not automatically wiped out when you file for bankruptcy. You must go through an extra legal process to prove that paying the loans back would cause you and your dependents an “undue hardship.” This is a high bar, but it is possible to get relief in certain serious situations.
If you are struggling with student loan debt, it is important to understand how bankruptcy treats these loans. This article explains the rules, the legal test courts use, and what alternatives might help you avoid bankruptcy altogether.
How Bankruptcy Normally Works
When you file for bankruptcy under Chapter 7 or Chapter 13, most of your unsecured debts—like credit card bills and medical bills—can be discharged, meaning you no longer have to pay them. However, student loans are treated differently under the law.
Since 1976, Congress has made it very difficult to discharge student loans in bankruptcy. The idea is to prevent people from borrowing money for school and then escaping repayment without a good reason. So, unless you can prove “undue hardship,” your student loans will survive bankruptcy.
The Undue Hardship Standard
To get student loans discharged in bankruptcy, you must file a separate lawsuit called an “adversary proceeding” within your bankruptcy case. In that lawsuit, you ask the judge to declare that repaying your loans would impose an undue hardship on you and your family.
Most courts use the “Bruno test” (named after a 1987 court case) to decide if you qualify. Under this test, you must show all three of the following:
- If forced to repay your loans, you cannot maintain a minimal standard of living for yourself and your dependents.
- Your financial situation is likely to continue for a significant part of the repayment period.
- You have made a good-faith effort to repay the loans before filing for bankruptcy.
You have to prove all three parts. If you fail even one, the judge will likely deny the discharge.
What Counts as Undue Hardship?
Courts have not defined “undue hardship” with a single clear rule. Each case is decided on its own facts. However, successful cases often involve permanent disabilities, severe chronic illness, or extreme poverty that will not improve.
For example, a borrower who is permanently disabled and cannot work might qualify. A single parent with a serious medical condition and minimal income might also qualify. But temporary financial trouble—like a job loss or a few months of low income—usually does not meet the standard.
Partial Discharge Is Possible
Even if you do not get a full discharge, some courts have allowed a partial discharge. That means the judge might reduce the amount you owe or change the repayment terms. For instance, the court could discharge part of the loan or lower the interest rate, making payments more manageable.
Partial discharge is still rare, but it shows that the system can offer some flexibility when the full discharge fails.
Alternatives to Bankruptcy
Because bankruptcy rarely works for student loans, you should explore other options first. These may help you avoid the legal process and the long-term credit damage that comes with bankruptcy.
| Option | Who It Helps | Key Feature |
|---|---|---|
| Income-Driven Repayment (IDR) Plans | Borrowers with high debt relative to income | Payments capped at a percentage of discretionary income; loan forgiveness after 20 or 25 years |
| Deferment or Forbearance | Borrowers with temporary hardship | Pause payments for a set time; interest may accrue |
| Loan Consolidation | Borrowers with multiple federal loans | Combine loans into one with a single monthly payment |
| Public Service Loan Forgiveness (PSLF) | Borrowers working for government or nonprofits | Forgiveness after 10 years of qualifying payments |
These options are only for federal student loans. Private student loans have fewer protections, but some lenders offer forbearance or modified repayment plans. Contact your loan servicer to see what you qualify for.
Steps to Take If You Are Considering Bankruptcy
If you are seriously thinking about bankruptcy to deal with student loans, follow these steps:
- Consult with a bankruptcy attorney who has experience with student loan discharge cases.
- Gather all your loan documents, including promissory notes and payment history.
- Document any disability, medical condition, or other hardship with official records.
- Keep evidence of your good-faith efforts to repay, such as payment receipts or records of requests for deferment.
These steps will help you build a strong case. But remember, the outcome is never guaranteed.
The Bottom Line
Bankruptcy does not get rid of student loans in most cases. The law sets a very high bar called “undue hardship,” and only a small percentage of borrowers who try succeed. If you are struggling, look into income-driven repayment plans, deferment, or loan forgiveness programs before turning to bankruptcy. For most people, these alternatives offer more realistic relief without the long-term consequences of bankruptcy.
Frequently Asked Questions
Can student loans be discharged in bankruptcy?
Yes, but only if you prove undue hardship in a separate legal proceeding, which is very difficult to do.
What is the undue hardship test for student loans?
It is a legal standard where you must show you cannot maintain a minimal standard of living, your situation will not improve, and you made good-faith efforts to repay.
Are private student loans dischargeable in bankruptcy?
Private student loans are also subject to the undue hardship standard, so they are just as hard to discharge as federal loans.
Can I get partial discharge of my student loans?
Some courts have allowed partial discharges, reducing the amount owed or changing terms, but this is rare and not guaranteed.
What alternatives exist to bankruptcy for student loan debt?
Income-driven repayment plans, deferment, forbearance, and loan forgiveness programs like PSLF are common alternatives.
