Bankruptcy – Student Loan Debt
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Bankruptcy and Student Loan Debt
Understanding the Challenge
For many people, student loans are one of the most overwhelming financial burdens. Even after years of repayment, high balances, interest accrual, and limited repayment options can make it feel like there is no end in sight. When other debts such as credit cards, medical bills, or personal loans pile on top, filing for bankruptcy may seem like the only option.
But how does bankruptcy actually impact your student loan debt? The answer is complicated—and it depends on your circumstances.
Can Bankruptcy Eliminate Student Loan Debt?
Unlike most unsecured debts, student loans are not automatically discharged in bankruptcy. To have them reduced or eliminated, you must prove “undue hardship” in what’s called an adversary proceeding.
Courts generally look at factors such as:
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Whether you can maintain a minimal standard of living while repaying the loans.
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Whether your financial situation is likely to improve in the future.
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Whether you’ve made a good faith effort to repay.
This is a high bar to meet, but in recent years, there has been growing recognition of how crushing student loan debt can be, and courts have become more receptive to discharge requests under the right conditions.
Bankruptcy Options and Student Loans
Chapter 7 Bankruptcy
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Most unsecured debts are discharged.
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Student loans require proving undue hardship.
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Can provide quick relief from credit cards, medical bills, and other debts—freeing up money to focus on student loan repayment.
Chapter 13 Bankruptcy
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Creates a repayment plan lasting 3–5 years.
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Student loans may not be fully discharged, but payments are paused or reorganized.
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Provides protection from aggressive collection actions while you regain financial stability.
Recent Developments in Student Loan Discharge
In 2022, the Department of Justice and Department of Education announced new guidelines making it easier for borrowers to seek discharge of federal student loans in bankruptcy. These reforms mean:
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Courts may now apply more consistent standards.
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Borrowers may have a better chance of relief if they can show long-term financial hardship.
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Federal attorneys can agree to discharge without requiring a full trial in some cases.
These changes represent a major shift that could give struggling borrowers a fresh start.
Proving “Undue Hardship” for
Student Loan Bankruptcy
What Is Undue Hardship?
Student loans are not automatically wiped out in bankruptcy. To have them discharged, you must prove that paying them back would cause “undue hardship.” This is a higher standard than for most other debts, but with the right evidence, it’s possible.
Most courts apply the Brunner Test, which requires you to prove three things:
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You cannot maintain a minimal standard of living if forced to repay your loans.
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Your financial hardship will likely continue for much of the repayment period.
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You have made a good faith effort to repay your loans.
Evidence Courts Look For
To strengthen your case, you should be ready to show documentation such as:
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Proof of income (pay stubs, tax returns, Social Security/benefit statements).
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Proof of expenses (housing, food, transportation, medical bills, childcare).
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Medical records if illness or disability affects your earning ability.
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Employment history, job applications, and proof of limited work opportunities.
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Student loan repayment history, including deferments, forbearances, or efforts to enter repayment plans.
The Adversary Proceeding
Proving undue hardship happens through a special process in bankruptcy called an adversary proceeding—essentially, a lawsuit within your bankruptcy case.
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You file the request with the court.
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The lender or Department of Education can respond.
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A judge reviews your financial situation and decides if repayment would be an undue hardship.
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In some cases, settlements are reached without a full trial.
Recent Changes That May Help
New federal guidelines (2022) make it easier to discharge federal student loans in bankruptcy if you clearly meet hardship standards. Government lawyers can now agree to loan discharges without requiring borrowers to go through a drawn-out trial.
Even If Full Discharge Isn’t Possible
Sometimes, courts may provide partial relief, such as:
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Reducing your loan balance
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Lowering your interest rate
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Extending your repayment period
This can still make your student loans more manageable while giving you financial breathing room.
Student Loan Hardship
Self-Check Worksheet
Important: This worksheet is for informational purposes only. It does not guarantee a court outcome. Every case is unique.
Step 1: Can You Maintain a Minimal Standard of Living?
☐ My monthly income is less than or just enough to cover basic needs (rent/mortgage, food, utilities, healthcare, transportation).
☐ Paying student loans would mean I can’t cover essentials.
☐ I rely on public assistance or help from family/friends to make ends meet.
Step 2: Is This Situation Likely to Continue?
☐ I have a disability, chronic illness, or other medical issue that affects my ability to work.
☐ My age, work history, or skills make it unlikely my income will significantly improve.
☐ I’ve been unemployed or underemployed for a long period despite efforts to find better work.
☐ Other factors (such as dependents with special needs) make it unlikely I’ll earn enough to repay.
Step 3: Have You Made Good Faith Efforts?
☐ I have tried to make payments when I could.
☐ I applied for an income-driven repayment plan or other relief program.
☐ I communicated with my loan servicer about my financial hardship.
☐ I didn’t deliberately avoid or ignore the loans.
Step 4: Totals
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If you checked several boxes in all three steps, you may be a strong candidate for showing “undue hardship.”
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If you checked some boxes in each step, you may still qualify, but your case will depend on the details.
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If you checked few or no boxes, it may be harder to prove hardship, but a consultation with an attorney can still help.
📌 Next Step: If this worksheet looks like your situation, consider talking with a bankruptcy or consumer protection attorney. Recent changes in the law may make it easier to discharge federal student loans.
How Our Firm Can Help
At Ginsburg Law Group, we guide clients through the complex relationship between bankruptcy and student loans. We will:
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Review your full financial picture.
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Explain how bankruptcy could impact your student loans.
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Assess whether you may qualify for undue hardship discharge.
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Explore alternatives such as income-driven repayment plans, loan consolidation, or negotiation.
Every case is unique, and our goal is to create a personalized strategy that relieves your financial stress and helps you move forward.
📞 Call 855-978-6564
💻 Email: bankruptcy@ginsburglawgroup.com
