Discharging Student Loans in Bankruptcy: Complete Guide
Learn how to discharge federal student loans in bankruptcy using the new DOJ attestation process and undue hardship standards.
Discharging Student Loans in Bankruptcy: A Complete Guide
Student loan debt has become a significant financial burden for millions of Americans. While most consumer debts can be eliminated through bankruptcy, student loans have traditionally been treated differently under federal law. However, recent changes to the process have made it more feasible for borrowers facing genuine financial hardship to seek relief through bankruptcy. This comprehensive guide explains how to discharge student loans in bankruptcy, the legal standards you must meet, and the new streamlined process available to debtors.
Understanding Student Loan Dischargeability in Bankruptcy
Student loans—both federal and private—are generally considered nondischargeable in bankruptcy. This means that filing for Chapter 7 or Chapter 13 bankruptcy will not automatically eliminate your student loan obligations. However, the law provides an important exception: if you can demonstrate that repaying your student loans would impose an “undue hardship” on you and your dependents, you may be eligible to discharge some or all of your student loan debt through a bankruptcy proceeding.
The key distinction is that while other debts like credit cards, medical bills, and personal loans can typically be discharged without proving hardship, student loans require you to take an additional legal step and meet a specific standard of proof. This higher threshold reflects the federal government’s interest in ensuring that student loan borrowers exhaust all other options before seeking relief through bankruptcy.
What Constitutes Undue Hardship?
The foundation of any student loan discharge in bankruptcy is establishing “undue hardship.” However, this term is not uniformly defined across all courts, and different courts may apply different standards when evaluating your case.
The Brunner Test
Many courts use the Brunner test, which requires you to demonstrate three key factors:
- Current inability to pay: You must prove that your current income and expenses show you cannot afford to make payments on your student loans while maintaining a minimal standard of living.
- Likely continuation of hardship: You must establish that your current financial situation is likely to continue for a substantial portion of the remaining repayment period for your loans.
- Good faith efforts: You must demonstrate that you have made a genuine, good faith effort to repay your student loans.
The Totality of the Circumstances Test
Some courts employ a broader approach called the “totality of the circumstances” test, which evaluates all relevant factors in your case to determine whether you face undue hardship. This test provides more flexibility but also requires you to present a comprehensive picture of your financial situation and life circumstances.
The New DOJ Attestation Form Process
Recent guidance from the Department of Justice in coordination with the Department of Education has introduced a new, more accessible process for seeking student loan discharge in bankruptcy. Rather than requiring a full adversarial trial on the issue of undue hardship, this new process allows debtors to submit a completed Attestation Form to seek the DOJ’s agreement to settle the case.
The key advantage of this new process is that it reduces litigation burdens and costs while providing a clearer pathway for borrowers who genuinely cannot afford to repay their loans. The Attestation Form is a 15-page document that collects detailed information about your income, expenses, and payment history. The DOJ uses this information to evaluate whether to recommend settlement of your discharge case.
Step-by-Step Process for Discharging Student Loans in Bankruptcy
Step One: File Your Bankruptcy Case
To begin the process of discharging student loans, you must first file for bankruptcy protection under either Chapter 7 or Chapter 13. Filing fees are approximately $313 for Chapter 13 bankruptcy and $338 for Chapter 7 bankruptcy. You may be eligible to have these fees waived or reduced if you meet income requirements.
Step Two: Initiate an Adversary Proceeding
Within your bankruptcy case, you must file an adversary complaint—essentially a lawsuit within your bankruptcy—to determine whether your student loans are dischargeable. An adversary proceeding is subject to bankruptcy rules that are nearly identical to the Federal Rules of Civil Procedure. The complaint and summons must be served on your current loan holder using the method specified in Bankruptcy Rule 7004(b)(5). If your loans are held by the Department of Education, ED should be named as a defendant.
Step Three: Complete the Attestation Form
The next critical step is completing the 15-page Attestation Form and submitting it to the Department of Justice. This form is the centerpiece of the new discharge process. It requires you to provide detailed information about your current and future financial circumstances, including your inability to repay the student loans and your good faith efforts to make payments.
Step Four: Document Your Income and Expenses
The income and expense information you provide on the Attestation Form is crucial to your case. This information will be used to determine whether you meet the first prong of the undue hardship standard: whether your current income and expenses demonstrate that you cannot make payments on your student loans while maintaining a minimal standard of living. You will need to provide documentation such as recent tax returns, pay stubs, and statements of your monthly living expenses.
Step Five: Demonstrate Present Inability to Pay
On the attestation form, you will calculate your net monthly income by deducting your allowable expenses from your gross income. If your allowable expenses exceed your income, resulting in zero or negative net income, this demonstrates present inability to repay. If your remaining income is sufficient to make full student loan payments, the Assistant U.S. Attorney (AUSA) reviewing your case will likely not recommend settlement. However, if you can make only partial payments, you may qualify for a partial discharge.
Step Six: Evidence of Good Faith Efforts
You must provide evidence that you have made good faith efforts to repay your student loans. This evidence can include:
- Making payments on the loans
- Applying for deferment or forbearance options
- Enrolling in an income-driven repayment plan
- Applying for federal consolidation loans
- Responding to outreach from loan servicers or collectors
- Engaging meaningfully with the Department of Education or your loan servicer regarding payment options
Step Seven: Special Circumstances Consideration
The new DOJ guidance recognizes certain special circumstances that support a discharge recommendation:
- Debtor is age 65 or older
- Debtor has a disability or chronic injury affecting income potential
- Debtor has been unemployed for at least five of the last ten years
- Debtor failed to obtain the degree for which the loan was procured
- Loan has been in payment status (other than in-school or grace period status) for at least ten years
Step Eight: AUSA Review and Consultation
After you submit your completed Attestation Form, an Assistant U.S. Attorney will review it and may request additional information to verify your statements. The AUSA is expected to consult with the Department of Education on the appropriate course of action, ensuring that the final decision incorporates Education’s experience administering student loans and its role as creditor.
Step Nine: Suspension of Litigation Timeline
While your case is under review, the parties should file a joint request to suspend pre-trial deadlines and the trial date to allow time for the DOJ and Department of Education to evaluate your attestation.
Step Ten: Settlement Recommendation and Final Judgment
The AUSA makes a recommendation on settlement based on your present and future financial circumstances and your good faith efforts to repay. This recommendation is submitted along with the Department of Education’s recommendation. If both agencies recommend discharge, the government and you will stipulate to the facts demonstrating that the debt would impose undue hardship, and both parties will recommend to the court that your student loans be discharged. While the stipulation is not binding on the court, bankruptcy courts typically approve consent judgments entered into by the parties in adversary proceedings.
Federal vs. Private Student Loans
An important distinction exists between federal and private student loans in bankruptcy. Federal student loans—including Direct Loans, PLUS loans, and other loans held by the Department of Education—can potentially be discharged through the process described above. However, private student loans cannot be discharged in bankruptcy and are treated like other consumer debts. If you have private student loans, bankruptcy will not provide relief for these debts.
Costs and Legal Assistance
Discharging student loans in bankruptcy involves several costs. Beyond the bankruptcy filing fees ($313-$338), you will likely need to hire an attorney to represent you in the adversary proceeding. Attorney fees for student loan discharge cases vary depending on your location and the complexity of your case, but many bankruptcy attorneys charge between $1,500 and $5,000 for this specialized work. Some nonprofit organizations and legal aid societies may provide assistance if you cannot afford a private attorney.
Frequently Asked Questions
Q: Can I discharge private student loans in bankruptcy?
A: No. Private student loans cannot be discharged in bankruptcy. Only federal student loans held by the Department of Education may potentially be discharged if you meet the undue hardship standard.
Q: What is the difference between Chapter 7 and Chapter 13 bankruptcy for student loans?
A: Both Chapter 7 and Chapter 13 bankruptcy allow you to pursue student loan discharge through an adversary proceeding if you meet the undue hardship standard. Chapter 7 is a complete liquidation, while Chapter 13 involves a repayment plan over three to five years. The student loan discharge process is essentially the same under both chapters.
Q: How long does the student loan discharge process take?
A: The timeline varies depending on how quickly the AUSA and Department of Education review your attestation form and reach a recommendation. The process can take several months to over a year, particularly if additional information is requested.
Q: Will discharging my student loans in bankruptcy damage my credit?
A: Yes. Filing for bankruptcy will negatively impact your credit score and will remain on your credit report for seven to ten years. However, if your student loans are in default or you are unable to pay them anyway, your credit may already be damaged.
Q: What counts as “good faith effort” to repay student loans?
A: Good faith efforts include making payments when possible, applying for income-driven repayment plans, seeking deferment or forbearance, applying for consolidation, and responding to outreach from loan servicers. You do not need to have made perfect or complete payments; rather, you must demonstrate that you took steps to address your loan obligations within your financial capabilities.
Q: Can I discharge only part of my student loan debt?
A: Yes. If you can demonstrate partial ability to pay, the AUSA may recommend a partial discharge, allowing you to discharge a portion of your student loans while remaining obligated to pay the remainder.
Q: Is the DOJ recommendation binding on the bankruptcy court?
A: No. The DOJ recommendation is not binding on the bankruptcy court. However, courts typically give significant weight to the government’s position and generally approve settlements when both the government and debtor agree that undue hardship exists.
References
- New Process to Discharge Student Loans in Bankruptcy — National Consumer Law Center. 2024. https://library.nclc.org/article/new-process-discharge-student-loans-bankruptcy
- What Does it Take to Discharge Student Loans in Bankruptcy? — Dworken Law. 2024. https://dworkenlaw.com/what-does-it-take-to-discharge-student-loans-in-bankruptcy/
- Navigating Student Loan Debt in 2025: Discharge in Bankruptcy and Related Options — Ryan Bankruptcy Law. 2025. https://www.ryanbk.com/blog/2025/july/navigating-student-loan-debt-in-2025-discharge-i/
- Can You File Bankruptcy on Student Loans? Yes. Here’s How. — Upsolve. 2024. https://upsolve.org/learn/bankruptcy-eliminate-student-debt/
- Navigating the New Student Loan Discharge Process: Overview and Additional Resources — U.S. District Court, Western District of Washington. 2024. https://www.wawb.uscourts.gov/content/navigating-new-student-loan-discharge-process-overview-and-additional-resources
- Discharge in Bankruptcy — Federal Student Aid, U.S. Department of Education. 2025. https://studentaid.gov/manage-loans/forgiveness-cancellation/bankruptcy
- Student Loan Guidance — U.S. Department of Justice. 2024. https://www.justice.gov/ust/student-loan-guidance
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