Student Loans and Bankruptcy: The Uphill Climb to Eliminating Your Student Loan Debt By Matt Nash


Student loan debt is on the rise in this country, so it is no surprise that one of the most common questions posed by potential clients is whether or not they can eliminate their student loan debt. The answer is most likely you will have to repay your student loans — this is true whether you file for Chapter 7 or Chapter 13 bankruptcy. However, there are limited circumstances where student loans will not have to be repaid after filing bankruptcy. In these rare instances, student loan debt can be partially (or even fully) discharged after filing bankruptcy if, in an adversary proceeding, you can show that payment of the student loan will impose an undue hardship on you and your dependents.

Most courts are most commonly applying what is known as the Brunner Test to determine whether a student loan payment is an undue hardship. This test requires that you show:

  • You cannot maintain, based on current income and expenses, a minimal standard of living* for yourself and your dependents if you were required to pay the student loans
  • Additional circumstances exist showing that your state of affairs is likely to persist for a significant portion of the repayment period of the student loans
  • You have made good faith efforts to repay the loans

*This minimal standard of living prong is examined on a case-by-case basis and the court examines several factors including income to student loan debt ratio, household size, and the location of the person in debt.

Without a disability or some other ongoing hardship to prove your situation is not likely to improve in the future, it is very difficult to overcome the second prong. Based on these factors, it is best for you to assume that your student loan obligation will not be discharged in bankruptcy.