Navigating Financial Aid During and After Bankruptcy: A Step-by-Step Guide
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Filing for bankruptcy doesn’t block you from getting federal student aid. Most federal loans are based on financial need, not credit history. That means even if you’ve filed Chapter 7 — or are currently in a case — you can still apply for grants, loans, and other aid through FAFSA. Private student loans are a different story. Many lenders look at your credit, so a recent bankruptcy might affect your chances of getting approved or lead to higher interest rates. But it may still be possible.
Written by Attorney Andrea Wimmer. Legally reviewed by Jonathan Petts
Updated September 11, 2025
What Kind of Financial Aid Can You Get if You’ve Filed Bankruptcy?
Generally speaking, you can get federal financial aid even if you’ve filed bankruptcy. There are many different kinds of federal student aid, but the two broadest categories are aid that doesn’t have to be paid back and aid that does have to be paid back.
Financial Aid You Don’t Have To Repay
Some types of federal aid don’t have to be paid back. These usually come in the form of:
✅ Grants
✅ Scholarships
✅ Work-study jobs
These can be very helpful in offsetting the cost of college, but they don’t always cover the full cost of attendance. This is why many people turn to student loans to cover the difference.
Financial Aid You Do Have To Repay
There are two main types of student loans:
Federal student loans, which are backed by the federal government
Private student loans, which are issued and backed by private financial institutions like banks and credit unions
Regardless of which type of student loan you get, you’ll have to pay it back, including interest, with a monthly payment during a set repayment period.
💻 To apply for federal student aid, simply complete the Free Application for Federal Student Aid (FAFSA) form. According to the U.S. Department of Education, financial need is one of the primary eligibility requirements for most federal financial aid programs.
To apply for private student loans, you’ll need to find a private lender and go through the application process with that lender. Each application process will vary depending on the terms of each lender or loan servicer.
Can You Get Federal Student Loans if You’ve Filed Chapter 7 Bankruptcy?
Yes, you usually can. Most people who’ve filed Chapter 7 have no trouble qualifying for federal student loans.
That’s because most federal loans don’t look at your credit history when deciding if you’re eligible. Instead, they’re based on your financial need. This means a past bankruptcy typically won’t hurt your chances of getting these types of loans.
The main federal student loan program is called the Direct Loan Program. These loans come straight from the U.S. Department of Education and are backed by the federal government.
Here are three common types of Direct Loans that don’t require a credit check:
Direct Subsidized Loans Direct Unsubsidized Loans
Direct Consolidation Loans
⚠️ One exception is Direct PLUS Loans. These loans do require a credit check, so a recent bankruptcy on your credit report could affect your ability to get one.
If you’re interested in a PLUS Loan but have credit issues, there may still be ways to qualify, like applying with an endorser (a co-signer) or documenting special circumstances.
The Bankruptcy Code Protects Most Student Loan Borrowers
The Bankruptcy Code (the law that governs the bankruptcy process) protects bankruptcy filers from being discriminated against when it comes to federal student loan eligibility. Under the law, government agencies that offer student aid (loans or grants) can’t deny aid to someone who is in or has filed bankruptcy.
The same rule applies to anyone in the business of offering loans that are guaranteed or insured under a student loan program from the federal government.
💡 Here’s what you need to know:
You can’t be denied federal financial aid because you’ve filed bankruptcy in the past.
Government student aid providers can’t hold nonpayment of a dischargeable (or discharged) debt against you.
You can get federal loans while in Chapter 7 bankruptcy.
⚠️ Importantly, this doesn’t apply to private student loans.
Can You Get Private Student Loans After Filing Chapter 7?
It depends on the lender.
Many people still qualify for private student loans after filing bankruptcy, but your eligibility will depend on which lender you use and what their requirements are.
🔎 Private lenders typically run credit reports and check your credit score when deciding whether to loan you money and what interest rate you’ll get. Having a recent bankruptcy on your credit may negatively impact your chances of getting approved for a private loan or getting a loan at a decent interest rate for a while.
📈 The good news is that the impact to your credit score will decrease as your bankruptcy filing ages. And there are several things you can do post-filing to start improving your credit.
Can You Get Rid of Federal Student Loans by Filing Chapter 7 Bankruptcy?
Yes, you can get rid of most federal student loans by filing bankruptcy, but you have to meet strict eligibility criteria.
The Department of Education and Department of Justice released guidelines in late 2022 to help bankruptcy courts interpret the eligibility criteria more consistently. In a student loan bankruptcy, the main thing you have to prove to a bankruptcy judge is that repaying your student loans is causing and will continue to cause you undue hardship. You also need to prove that you’ve made a good faith effort to repay your loans.
Bankruptcy and Private Student Loans: What You Need To Know
Think of a private student loan like a personal loan or a car loan. These loans are issued by banks and financial institutions that set the interest rate and define the loan terms and eligibility requirements. You usually need good credit to get private loans.
Private student loans often have higher interest rates than federal loans and rarely come with flexible repayment plan options like federal student loans do, so think carefully before taking out this kind of debt. And know that if you bring a cosigner aboard to help you secure the loan, they’ll be on the hook for your student loan repayment if you default.
Because the federal government doesn’t offer or guarantee private student loans, these loans aren’t addressed in the U.S. Bankruptcy Code. This means the private lender gets to decide whether to lend to you if you have a bankruptcy on your credit report.
Why Bankruptcy Might Be Your Best Best for Dealing With Student Loan Debt
Student loan debt has been increasing steadily since 2006 because the cost of higher education has been increasing, too. As of early 2023, total student debt in the U.S. is at a staggering $1.75 trillion, and the vast majority of that debt is from federal loans. The average borrower has about $40,000 in student debt.
Borrowers who aren’t able to resume making payments can apply for deferment or forbearance or try to get on an income-driven repayment plan, but this may just be a temporary solution.
To get rid of student loan debt for good, you may want to look into filing Chapter 7 or Chapter 13 bankruptcy to get a student loan discharge.
What You Need To Know About Filing Bankruptcy on Student Loan Debt
Both federal and private student loans are treated differently than other consumer debt in a bankruptcy filing. Neither are automatically discharged like credit card debt or medical bills (called unsecured debts) if your filing is successful.
To get rid of your student loans, you must take the additional step of filing an adversary proceeding so the bankruptcy court can evaluate whether you meet the undue hardship standard. This has historically been done through the ill-defined Brunner test.
In late 2022, the elements of the test were more clearly defined, making the adversary proceeding process easier, at least for federal student loan borrowers. In fact, Upsolve is now able to help eligible filers through this process.
If you have a private student loan, you still need to file an adversary proceeding and the process will be more difficult. That said, it’s not impossible. In fact, of the bankruptcy filers that have tried, 40% have received some kind of student loan debt relief as part of their bankruptcy case.[1]
Let’s Summarize…
Filing bankruptcy does not prevent you from getting federal student loans or other types of federal financial aid. While some federal loans do require that you have good credit, most don’t depend on creditworthiness. Instead, they look at your financial need based on your current financial situation.
If you want to erase your student loan debt for good, you can go through a bankruptcy proceeding. The bankruptcy discharge won’t automatically include your student loan debt, but if you can prove undue hardship in an adversary proceeding, you can get federal student loan debt discharged.
Jason Iuliano. (2011, July). An Empirical Assessment of Student Loan Discharges and the Undue Hardship Standard. 86 American Bankruptcy Law Journal 495 (2012). Retrieved September 26, 2020, from https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1894445
