How to get rid of your student loans through bankruptcy

Unlike other types of debt, you have to prove undue hardship.

Last updated:

We value our editorial independence, basing our comparison results, content and reviews on objective analysis without bias. But we may receive compensation when you click links on our site. Learn more about how we make money from our partners.

While you can file for bankruptcy to get rid of your student loans, it’s a lot harder than filing for bankruptcy for other types of debt. That’s because you have to prove your student loans cause you undue hardship under current bankruptcy law, adding another step to your case. With no clear legal definition, this can be difficult to prove — you might want to hire a lawyer to help build a case.

Step 1: Check if your loans might qualify as an undue hardship.

Before you decide to file for bankruptcy, check to see if your loans might meet the standards for “undue hardship.” While there’s no legal definition of the term in the US Bankruptcy Code, most courts use the Brunner test to determine if you qualify.

To pass the Brunner test, all three of the following statements must apply to you:

You can’t maintain a minimal standard of living if forced to repay your student loans.

Generally, this means you cut back your personal expenses to the bare essentials for yourself and your dependents. You might also have to show that you’ve made attempts to increase your income.

You can prove that student loan repayments would pose undue hardship for a significant part of your loan term.

You need to be able to show that these financial circumstances will continue indefinitely or for at least several years. If you lost your income due to temporary circumstances — say you broke your foot and can’t work — that likely won’t count.

You’ve made a good faith effort to repay your loans before filing for bankruptcy.

This could mean you’ve tried to change repayment plans, applied for deferment or forbearance when applicable, attempted to increase your income or cut back on unnecessary expenses.

Each court has a different interpretation of the Brunner test, so you might not qualify even if you think you should. For this reason, you might want to bring your case to a lawyer to get their input.

Step 2: Meet with a bankruptcy lawyer to discuss your case.

Hiring a lawyer isn’t absolutely necessary to file for bankruptcy, but it can make navigating the process a lot easier — especially with student loans. Look for a bankruptcy attorney that will work pro bono — you likely can’t afford to pay hundreds or thousands of dollars in legal fees.

Before you sign a retainer, you might want to set up a consultation to find out if they think you have a case.

Step 3: File for Chapter 7 or Chapter 13 bankruptcy.

Now that you have a lawyer, it’s time to go to the courts. First, you need to file for Chapter 7 or Chapter 13 bankruptcy.

  • Chapter 7 bankruptcy. The court discharges all of your debt, though it seizes some of your assets — like your home, car, valuable jewelry or art — to pay off your lenders. You also must meet certain income requirements, though you can typically qualify if you pass the Brunner test.
  • Chapter 13 bankruptcy. You get to keep your assets, but you don’t get your debt totally wiped out. Instead, the court adjusts the terms of your loans and gives you a payment plan of three to five years before your debts can be discharged.

If you hired an attorney, ask them which option is right for you. Depending on which you choose, you might have to attend credit counseling to go over your finances and absolutely make sure that bankruptcy is the best solution.

Already filed for bankruptcy? You can reopen the case to include your student loans.

Step 4: Start an adversary proceeding.

After you file for bankruptcy, you must also begin an adversary proceeding. You can do this by filing a written complaint that details your case — this is where your attorney can come in handy. After that, the judge will hear your case and come to a decision.

Getting rid of student loans through bankruptcy could get easier

Lawmakers have proposed a bill that would treat student loans like other types of debt in bankruptcy. If passed, the Student Borrower Bankruptcy Relief Act of 2019 would get rid of the undue hardship requirement. Instead, you would follow the standard procedure for filing Chapter 7 or Chapter 13 bankruptcy to get your student loans discharged the same way as other types of debts.

What happens if the court decides my loans pose undue hardship?

There are three potential outcomes if the judge rules that paying back your student loans would cause you and your dependents undue hardship:

  • Total discharge. You won’t have to make any repayments on your student loans and collection agencies are ordered to stop contacting you.
  • Partial discharge. The judge reduces the amount you owe but requires you to repay the rest on a modified repayment plan.
  • Adjusted terms. Your debt load stays the same, but the judge orders your lenders to adjust your rates or terms to give you repayments you can afford.

What are my options if I don’t qualify?

If you can’t qualify for discharge due to bankruptcy, contact your servicer as soon as possible. They’re likely aware of the situation and can discuss options you might not have explored, such as a new repayment plan. If you hired an attorney, they might be willing to negotiate with your servicer for you.

Bottom line

While not impossible, getting your student loans discharged through bankruptcy is a lot more complicated than other types of debt. That is, unless the Student Borrower Bankruptcy Relief Act of 2019 passes. In the meantime, you might want to find an attorney who’s willing to take on your case pro bono to help you navigate the process.

Check out our guide to student loans and bankruptcy to learn more about how it all works.

Compare your debt relief options

Updated November 15th, 2019
Name Product Costs Requirements
Monthly payment based on enrolled debt, no upfront fees
Must have at least $7,500 in unsecured debt and live in a serviced state.
Freedom Debt Relief is a debt settlement company that works to help people with unmanageable, unsecured debt get back on their feet.
18–25% of total enrolled debt
Must have a legitimate financial hardship which is preventing the ability to pay creditors and a minimum of $7,500 in debt.
Get back on your feet with a top-rated debt relief company that works with multiple types of debt.
Fees regulated by client's state of residence, can range from$0 to $69 with an average monthly fee of $35. No upfront or contingency fees.
Debt must not be payday loans or secured loans.
This debt settlement alternative can help you find a path to financial freedom.
Charges and fees vary by the company you're ultimately connected with
Must be at least 18 years old and a legal US resident; additional terms may apply based on services and products used.
This A+ BBB-rated service offers free consultations to lower your monthly payments help you get out of debt faster.
20% of enrolled debt or less, no upfront fees.
Must have verifiable income and more than $10,000 in unsecured debt or tax debt — excluding payday loans.
This company claims to significantly reduce your consumer and tax debt.

Compare up to 4 providers

Before you sign up with a debt relief company

Debt relief companies typically charge a percentage of a customer’s debt or a monthly program fee for their services. And they aren’t always transparent about these costs or drawbacks that can negatively affect your credit score. You might pay other fees for third-party settlement services or setting up new accounts, which can leave you in a worse situation than when you signed up.

Consider alternatives before signing up with a debt relief company:

  • Payment extensions. Companies you owe may be willing to extend your payment due date or put you on a longer payment plan if you ask.
  • Nonprofit credit counseling. Look for free debt-management help from nonprofit organizations like the National Foundation for Credit Counseling.
  • Debt settlement. If you can manage to pay a portion of the bill, offer the collection agency a one-time payment as a settlement. Collection agencies are often willing to accept a lower payment on your debt to close the account.

Frequently asked questions

Was this content helpful to you? No  Yes

Ask an Expert

You are about to post a question on finder.com:

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • finder.com is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Finder.com provides guides and information on a range of products and services. Because our content is not financial advice, we suggest talking with a professional before you make any decision.

By submitting your comment or question, you agree to our Privacy and Cookies Policy and Terms of Use.

Questions and responses on finder.com are not provided, paid for or otherwise endorsed by any bank or brand. These banks and brands are not responsible for ensuring that comments are answered or accurate.
Go to site