For many people, bankruptcy sounds like a “reset button” on overwhelming debt. Credit cards? Gone. Medical bills? Wiped away. But when it comes to student loans, the story is far more complicated.
You may have heard that student loans can’t be discharged in bankruptcy — but that’s not entirely true. While it’s definitely harder, it’s not impossible. In 2025, changes in how courts handle these cases have made it a little more realistic for struggling borrowers.
So let’s break down what really happens if you try to erase student loans through bankruptcy, who qualifies, and what the process looks like.
Bankruptcy Basics: Chapter 7 vs. Chapter 13
Before we get into student loans, you need to understand the two most common types of bankruptcy for individuals:
- Chapter 7 Bankruptcy
Known as “liquidation.” Most of your unsecured debts (like credit cards, medical bills, personal loans) are wiped out. But you may have to give up some assets. - Chapter 13 Bankruptcy
Called the “wage earner’s plan.” Instead of wiping debts instantly, you enter a 3–5 year repayment plan, after which remaining eligible debts are discharged.
👉 In both cases, student loans don’t automatically go away. You have to take an extra step: something called an adversary proceeding.
What Is an Adversary Proceeding?
An adversary proceeding (AP) is basically a lawsuit you file within your bankruptcy case. In this AP, you argue that repaying your student loans would cause “undue hardship.”
If the court agrees, your loans may be fully or partially discharged. If not, you remain responsible for them even after bankruptcy.
The “Undue Hardship” Test
Here’s the tricky part: proving undue hardship. Courts often use what’s called the Brunner Test, which has three requirements:
- Poverty Test
You cannot maintain a minimal standard of living for yourself and your dependents if forced to repay the loan. - Persistence Test
Your financial situation is unlikely to improve during the repayment period. - Good Faith Test
You’ve made a genuine effort to repay the loans (like attempting payment plans, deferment, or consolidation).
👉 In short: You need to show that paying your loans would keep you stuck in financial misery, with no realistic path out.
Recent Changes: Easier Than Before?
For decades, judges were extremely reluctant to discharge student loans. But recently, the Department of Justice and Department of Education have issued new guidance (as of late 2022 and updated into 2025) that makes it a little easier.
- Borrowers can now submit a standardized form detailing their financial hardship.
- Government attorneys are encouraged to recommend discharge if the evidence is strong, instead of fighting every case.
- Courts have become more open to partial discharge (wiping out part of the loan rather than all of it).
While it’s still tough, these changes mean bankruptcy is no longer a hopeless option for drowning student loan borrowers.
Federal vs. Private Student Loans
- Federal Loans: Harder to discharge, but recent policy shifts have mainly focused here, giving borrowers a fighting chance if hardship is proven.
- Private Loans: Sometimes slightly easier because they don’t always get the same protections as federal loans. But lenders fight hard to collect.
What Happens If You Succeed?
If the court grants discharge:
- Your student loan balance is wiped out (fully or partially).
- You’re free from collections, wage garnishment, or government seizure of tax refunds.
- Your credit report will reflect the bankruptcy, but your crushing student debt will no longer loom over you.
If the court denies:
- You remain responsible for your loans.
- But you may still get other debts (credit cards, medical bills) wiped away, freeing up money to focus on student loans.
The Risks and Downsides
- Bankruptcy stays on your credit report for 7–10 years.
- Legal fees can be expensive.
- Not all judges interpret “undue hardship” the same way — outcomes vary widely.
- You may need extensive documentation of your finances, job search efforts, and payment history.
Check More: How to Pay Off Student Loans Faster
Alternatives to Bankruptcy
If you don’t want to risk bankruptcy, you still have options:
- Income-Driven Repayment Plans (IDR): Federal loans can be tied to your income, sometimes lowering payments to $0.
- Public Service Loan Forgiveness (PSLF): For government and nonprofit workers after 10 years.
- Loan Rehabilitation: If you’ve defaulted, this can restore good standing.
- Refinancing: May lower interest rates (best for private loans if you have good credit).
So, Can Student Loans Be Discharged in Bankruptcy?
The honest answer: Yes, but it’s rare and difficult.
The courts want to see that you’ve truly hit rock bottom financially, that your situation isn’t improving anytime soon, and that you’ve tried everything else first.
But in 2025, with new guidelines and a shift in attitude, more borrowers than ever are finding success. If you’re overwhelmed by student loans and considering bankruptcy, talking to a bankruptcy attorney who understands student loan law is the smartest next step.
Final Thoughts
Bankruptcy isn’t an easy way out — but for some borrowers, it’s the only way forward. While student loans aren’t automatically erased, they’re not untouchable either.
If you’re struggling, don’t assume you’re trapped forever. Whether through bankruptcy, income-driven repayment, forgiveness, or refinancing, there are paths to relief.