Student Loan Dischargability in Bankruptcy


Clients frequently inquire as to whether their private and government backed student loans can be discharged in bankruptcy. Sadly for them, it is almost impossible to discharge federal student loans in bankruptcy given certain changes in the way they are structured today.  

The so called Brunner Test (named after the seminal case on the topic), which contains the standards used in bankruptcy courts to determine whether a student loan can be discharged, specifies that in order for discharge to occur, all of the following must be true:

  1. based on current income and expenses, the debtor cannot maintain a “minimal” standard of living for herself or her dependents if forced to repay the loans;
  2. additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period for the student loans; and,
  3. the debtor has heretofore made a good faith effort to repay the loans.

Yes, you can try to prove undue hardship, under these tests, but it is now, for all practical purposes, almost impossible to do and this is why. First, under the various special repayment schemes: income based repayment, pay as you go, income sensitive repayment; you can have a zero dollar ($0) monthly payment assuming your income is low enough.  At the end of the term of these programs (20 to 25 years), any remaining student loan balance will be forgiven. So how can anyone successfully argue that a zero (or very low) monthly payment with the prospect of loan forgiveness creates an undue hardship? Secondly, now that the Dept. of Education has a workable administrative process for a disability discharge, if you are declared 100% disabled by the social security admin, you can discharge your federal student loan.  Thus, people who once would have been able to show Brunner hardships because of disability no longer need to do so.  those people don’t need bankruptcy for their student loans.

So, if you have both significant private student loans and federal loans and are a good candidate for a bankruptcy hardship discharge, you include both classes of debts in the case.   (Note:  The bankruptcy must be filed (either a 7 or 13) then an adversary proceeding (2nd lawsuit) against the student loan lenders must be filed.) Assuming you can win on undue hardship, the court is likely to only discharge the private student loans because these do not have the programs discussed above attached to them.

If you are not already on one, you need to get on a specialized repayment program.  I suggest that you visit the following site to find out more information.


Also, it is recommended that you discuss this issue with a seasoned bankruptcy lawyer.  I am Christopher C. Carr, Esq., a Chester County Bankruptcy Lawyer who can assist you with these and all other matters relating to bankruptcy and debt relief.. Call me at 610-380-7969 today!