Can You File Bankruptcy on Student Loans?

There’s a long-standing myth that you can’t get rid of student loans through bankruptcy. This myth persists, in part, because the majority of student loan borrowers who are potentially eligible to have their debt discharged in their bankruptcy case don’t even try.^[1] Why not?

The bankruptcy process itself requires a lot of forms, documentation gathering, and patience. And to get rid of your student loan debt, you have to take an extra step: file for an adversary proceeding. In the past, this process was so complicated — and scary for many folks since it involved a separate hearing — that to do it successfully, most filers opted to hire a lawyer. 

In November 2022, the Department of Justice and Department of Education created a new process and released new guidelines to make the adversary proceeding process much simpler and less intimidating. The guidelines provide clarity to courts about how filers can prove “undue hardship.” This is making it easier for federal student loan borrowers to get a bankruptcy discharge. The Justice Department released a memo in July 2024 noting the significant increase in student loan bankruptcy discharges.

Let’s take a closer look.

Can Filing Bankruptcy Help You Get Rid of Student Loan Debt?

Yes, if you meet the eligibility requirements, bankruptcy may be a viable path to wiping out some or all of your federal student loan debt. It does not work for private student debt. First, make sure you’re eligible to file a personal bankruptcy case. This could be either Chapter 7 or Chapter 13, depending on your financial situation and goals. Then, make sure your loans qualify. Finally, see if you meet the undue hardship standard for discharging student loans through bankruptcy.

First Ask: Do You Qualify To File Bankruptcy?

If you’re thinking about filing bankruptcy to get a fresh start, start by considering your whole financial situation: what types of debt you have, how much debt you have, and what your current income and expenses are. You’ll also want to consider whether you own any assets — like a car, home, or retirement accounts — and if bankruptcy is the best form of debt relief for you. 

You’ll need to know your income and expenses for the means test. This is a test that all Chapter 7 bankruptcy filers must pass to prove they are eligible to file. If you don’t pass the means test, you may still be able to file bankruptcy, but you might need to look into Chapter 13. You can use our nonprofit’s free screener to see if you’re eligible to use our app to file your Chapter 7 bankruptcy paperwork.

Next Ask: Do Your Student Loans Qualify?

You’ll also want to look at what type of student loans you have. Currently, only Federal Direct Loans and/or Direct Consolidated Loans held by the U.S. Department of Education are eligible for a bankruptcy discharge under the new guidance. If you aren’t sure what type of loans you have, you can get that information from the National Student Loan Data System (NSLDS). The NSLDS can provide you with a report on all federal student aid you’ve received. 

Perkins Loans, FFEL/FFELP loans, and private student loans aren’t covered under the new guidance. In some cases, you can file bankruptcy on these and private student loans, but the process will look different. To learn more, read our article Can I Discharge a Private Student Loan in Bankruptcy?

Then Ask: Can You Demonstrate Undue Hardship?

Assuming you qualify for bankruptcy, you’ll then need to prove that you meet the undue hardship standard.

Courts assume that repaying your student loans would cause undue hardship when you :

• Can demonstrate that you don’t currently have the financial ability to make the monthly payments on your federal loans while maintaining a minimal standard of living

• Can demonstrate that this inability to pay your loans is likely to continue in the future

• Have made a good faith effort to repay your loans

These three elements make up what’s often called the Brunner test. Bankruptcy law doesn’t clearly define how filers can demonstrate their inability to pay or that they’ve made a good faith effort to do so. The new DOJ guidelines help bankruptcy judges interpret the Bankruptcy Code more uniformly by further defining these elements of the Brunner test. You can read more about each of these below in our section on the attestation form. 

If repaying your student loans is causing you serious hardship and you’re thinking of filing bankruptcy to address your loans and other debt, you can use our free screener to see if you’re eligible to prepare your paperwork for free. It only takes five minutes to see if you qualify.

How To File Student Loan Bankruptcy

Let’s lay out the steps to getting your student loans discharged in bankruptcy. To keep things concise, we’ll assume you’re already familiar with how to file a bankruptcy case. If not, read our popular article How to File Bankruptcy for Free first.

Assuming you’ve filed your bankruptcy case, here are the basic steps to get a student loan discharge.

Step 1: File an Adversary Complaint

An adversary complaint initiates the adversary proceeding, which is the first step toward discharging your student loans in Bankruptcy. You initiate the adversary proceeding by filing a complaint with the court clerk. A complaint is a formal legal document. Depending on which district you’re in, you may be able to file your complaint  electronically. If you don’t file it electronically, you’ll need to submit it with a cover letter, which the court provides as a PDF form. If you qualify to file your case with Upsolve, our nonprofit can help you prepare your complaint paperwork.

Important! Include Your NSLDS Report With Your Adversary Complaint!

You must include a complete list of your student loans along with your adversary complaint. To get this list, you can download a report from the National Student Loan Data System (NSLDS). Here’s an article detailing exactly how to do that: How To Use the National Student Loan Data System (NSLDS).

The Assistant United States Attorney (AUSA) will represent the U.S. Department of Education in the proceeding. The AUSA will review the adversary complaint and your attestation form.

Step 2: Serve the Complaint on Your Student Loan Servicer or Lender

After you file the complaint with the court, you must “serve” the complaint to the defendants you named — your federal student loan lender(s) — and send a copy to certain parties in the bankruptcy case. Serving the complaint simply means sending a copy by mail or delivering it in person. The point is to let the defendant — your lender — know about the adversary proceeding. You’ll also need to make sure to serve the AUSA with a summons and complaint.

Generally speaking, student loan bankruptcy filers will send the complaint to the following four parties:

• The U.S. Attorney of the Bankruptcy Filing District

• The Attorney General of the United States, Department of Justice

• The Student Loan Servicer (i.e. the Department of Education)

• The U.S. Trustee of the Bankruptcy Filing District. 

Step 3: Complete the Attestation Form

Next, you’ll fill out an attestation form. This is the form that will be used to determine if you meet the undue hardship requirements. The form begins by asking basic questions to gather your personal information and information about your student loans. The rest of the form is devoted to understanding whether you meet the undue hardship standard by asking about your income and expenses.

The Attestation Form: Income and Expense Information

Income information: This includes your household gross income, unemployment benefit payments, and Social Security payments.

Expense information: This includes your basic living expenses, uninsured medical costs, payroll deductions, housing costs, transportation costs, and other necessary expenses such as child care

What you’ll need to answer these questions: It’s helpful to gather recent paystubs, bank statements, and unemployment or Social Security paperwork (if applicable) to help you fill out the income portion of this form. 

For the expenses, gather recent bills including medical bills, insurance payments, your paystub (to see deductions), recent transportation bills and receipts (including for maintenance and gas). 

If you use a credit card or debit card to pay your expenses, you can look at your recent transaction history to capture some of the expenses you pay that you may not keep receipts for like groceries, housekeeping supplies, apparel, personal care products, gas for your car or public transportation costs. Be sure to include expense information for your dependents as well.

The Attestation Form: Information on Your Present Ability To Pay Your Student Loan Debt

There’s a pretty simple formula to determine your ability (or inability) to make your monthly student loan debt payment: Your gross income minus your allowed expenses. You’ll tally your gross income and allowed expenses on your attestation form. If you run these numbers through the formula and it shows there is $0 remaining each month, this shows an inability to pay your student loan debt. 

If you have some income remaining, the AUSA will look at your loan payment to determine if you qualify for a partial discharge.

The Attestation Form: Information on Your Future Inability To Pay Your Student Loan Debt

The attestation form will ask you a series of questions to get a sense of whether you’ll be able to repay your student loan debt in the future. The AUSA can presume you will not be able to repay your loans in the future if you meet any of the following criteria:

• Are 65 or older

• Have a disability or chronic injury that impacts your ability to work

• Have been unemployed for five or more years in the last decade

• Didn’t get a degree that the loan was meant to finance

The AUSA can also presume an inability to pay if your loan has been in repayment status for 10 years or more. These presumptions provide a more straightforward case to the AUSA, but they aren’t the only way to show an inability to pay. If your reason falls outside these presumptions, you can explain it in the space provided on the attestation form.

The Attestation Form: Information Showing a Good Faith Attempt at Repayment

The next portion of the attestation form helps the bankruptcy court determine whether you’ve made a “good faith effort” at student loan repayment.

The DOJ cites several examples of evidence of good faith. To demonstrate good faith, the borrower could have done one or more of the following:

• Made at least one student loan payment

• Applied for or been approved for deferment or forbearance

• Applied for or enrolled in an Income-Driven Repayment Plan

• Applied for or received a federal consolidation loan

• Contacted the loan servicer/lender or responded to a contact from the loan servicer or a collector regarding their repayment options

• Contacted a third-party organization whose goal was to help the borrower manage their student loan debt

To demonstrate good faith, filers must also show they’ve made an effort to work or find work and to maximize their income while minimizing their expenses. Essentially, filers must show they have managed their debts and finances responsibly given their circumstances.

Step 4: The AUSA Makes Its Recommendation to the Bankruptcy Court

The AUSA will review your attestation form to assess whether they believe the undue hardship standard has been met. Then, the ASUA makes a recommendation to the Bankruptcy Court handling the case. The DOJ guidance notes that this recommendation “is not binding on the bankruptcy court.” Though the court will use this information to determine whether or not to discharge all or a portion of the filer’s student loan debt.

Step 5: The Bankruptcy Court Issues a Decision

The judge in your case may decide to hold a hearing on your request. (Many are being held virtually.) 

If so, it’s a good idea to attend the hearing, so you can answer any questions the judge may have and so you can then hear the judge’s decision.

If you don’t agree with the judge’s decision, you can appeal the decision.

Why Did the DOJ Issue New Guidance for Bankruptcy and Student Loans?

The DOJ’s guidelines are part of a broader set of efforts to address the $1.6 trillion in federal student debt^[2] in this country. Though the new DOJ guidelines could have a significant impact on student loan borrowers, they didn’t garner as much media attention as other student debt relief measures like the student loan repayment pause and Biden’s student loan forgiveness proposal. 

But for the many thousands of student loan borrowers who do opt to file bankruptcy, clarifying and simplifying the student loan discharge process could be life-changing.

Federal Student Loan Relief: Alternatives to Bankruptcy for Managing Debt

If you’re struggling with student loans, there are options to manage your debt without filing for bankruptcy. Federal government programs and other solutions can help make payments more affordable and provide long-term relief.

• Income-Driven Repayment Plans (IDRs): These plans lower your monthly payments based on your income and family size. After 20–25 years of qualifying payments, the remaining balance may be forgiven. Keep in mind, forgiven amounts could be taxable.

• Loan Forgiveness Programs: Programs like Public Service Loan Forgiveness (PSLF) forgive loans for borrowers working in qualifying public service jobs after 10 years of payments. Other forgiveness options exist for teachers, healthcare workers, and military personnel.

• Loan Consolidation: Combining multiple federal loans into one can simplify payments and open up new repayment options. However, it may increase the total interest paid over time.

• Deferment or Forbearance: These options let you temporarily pause payments during financial hardship. Interest may still accrue, especially with forbearance, so they’re best used as short-term fixes.

• Refinancing (Private Loans): Refinancing can lower your interest rate but comes with risks. For federal loans, refinancing into private loans means losing federal benefits like income-driven plans and forgiveness options.

These solutions can help make student loan debt more manageable.