How to File for Student Loan Bankruptcy

In the United States, the average student loan debt is $32,731. Since 2016, the average amount of student loan debt has increased by 20%. Additionally, over 600,000 borrowers owe over $200,000 in student debt, a number that will likely increase. As tuition costs continue to rise along with inflation, more graduates cannot make their monthly student debt payments. There is a common misconception that filing for bankruptcy will never discharge a person’s student loan debt. However, it is possible to have your student loan debt discharged in bankruptcy under certain circumstances. 

Is it Possible to Have Student Loan Debt Discharged Through Bankruptcy?

It is challenging but not impossible to have student debt wiped out through bankruptcy. You will need to prove that the debt imposes an undue hardship on you and your dependents. When evaluating whether a borrower has shown undue hardship, bankruptcy courts use legal tests based on rulings in other cases. Most commonly, bankruptcy courts use the Brunner test. Brunner v. New York State Higher Educ. Servs. Corp., 831 F. 2d 395 (2d Cir. 1987). Under this test, you will need to prove that:

  • You cannot maintain a minimal standard of living based on your current income and expenses if you are forced to repay your student loans
  • Additional circumstances exist showing that your financial state of affairs will likely persist for a significant portion of the period of your student loans, and
  • You have made good faith efforts to repay your student loans 

When a claimant can prove that undue hardship exists successfully, the bankruptcy court will completely cancel or discharge student loan debt. Additionally, as soon as you file for bankruptcy, there will be an automatic stay protecting you from creditors pursuing the collection of your other debts. This day will be in place until your case is resolved or until the creditor receives permission from the bankruptcy court to attempt to collect from you again.

The Totality of the Circumstances Test

Most courts, including the federal courts of appeal, have adopted the Brunner test, but some courts have begun questioning whether they need to use a different standard. For example, some courts look at the totality of your circumstances when deciding whether you would suffer undue hardship from having to repay your student loan. When a court uses this task, you will not need to prove all of the elements of the Brunner test. Judges will be able to consider other factors. There are a few other tests, and the test used in your case will depend on the jurisdiction you are in and the judge presiding over your case.

How to Discharge Your Student Loans Through Bankruptcy

Your student loans will not be automatically discharged through bankruptcy. Instead, you will need to file a petition, called an adversary proceeding, asking the court to decide your student loan debt. Suppose you have already filed for bankruptcy but did not include a petition to discharge your student loan debt. In that case, you can reopen your case anytime to file the proceeding without paying an additional filing fee. Filing an adversary proceeding is not as straightforward as filing a regular Chapter 13 bankruptcy petition. Make sure you consult with an attorney with knowledge and experience related to discharging student loan debt.

Examples of Undue Hardship

Ultimately, it will be up to the bankruptcy court to determine whether you meet the “undue standard” requirement. An example of undue hardship would be a person in her 60s who still has $35,000 in student loan debt from 20 years ago. Perhaps the student loan debt had grown to be over $95,000. She now has chronic medical problems, and her only income is a social security check of $750 per month. The bankruptcy court would probably discharge her debt as long as she had made a good-faith effort to maximize her income, minimize expenses, and obtain employment.

Bankruptcy courts are more likely to grant a discharge of student debt in cases where the borrower did not benefit from the education or went to a fraudulent school. In other cases, borrowers who take out significant student debt but find themselves in low-paying careers may be able to show undue hardship. For example, if a married couple had over $100,000 in debt and were working as teachers in a low-income area and staying on a budget, they may be able to show undue hardship. 

Income-Based Repayment Plans

To have your student debt discharged in bankruptcy, you must show that you have already made good-faith efforts to repay your student loans. With the availability of income-based loan repayment plans, judges are sometimes more hesitant to find that a debtor has made a good faith effort to repay a student debt. For example, if a debtor has not tried to use an income-based repayment plan, and such a plan could provide him or her with extensive relief, the court may be less inclined to discharge the student loan debt.

You are not required to have participated in an income-based replacement plan to meet the undue hardship rule. Nonetheless, your attorney should be prepared to argue that using an income-based repayment plan will not provide you the same comprehensive debt relief as a bankruptcy discharge.

Is Bankruptcy a Good Option for Me?

If you believe that you may be able to prove undue hardship and Court, filing for bankruptcy could be a strategic option for you. Speaking to an attorney about the pros and cons of filing for bankruptcy and whether you are likely to be able to prove undue hardship can help you make an informed decision. 

Depending on the amount of your student loan debt, it may not be worth filing for bankruptcy. A bankruptcy will be on your credit history for at least 10 years, and you will need to pay expenses associated with filing for bankruptcy. There are also limits on how often you can file for bankruptcy. On the other hand, if you have significant student loan debt and cannot make the minimum monthly payments, it is worth looking into filing for bankruptcy for a fresh financial start.

See What Our Clients Have To Say

Yelp Review

Roger C.

I reached out to BLC to help assist with a chapter 7 business bankruptcy and they provided excellent guidance, advice, and support through the entire process. In my case an adversarial action was filed by one of the creditors and attorney Ahren Tiller and his staff provided sound ...arguments which prevailed. Couldn’t have found a more experienced and supportive team to represent me in a tricky situation. I would highly recommend them to anyone making the difficult but sometime necessary decision to find financial relief. Read more
Yelp Review

Justin R.

Like many others before and during the pandemic, life happenings caused me to be in a financial situation to warrant bankruptcy. The BLC was super professional all the way through the entire process. Right after I paid for my Bankruptcy, I got sick and had to have surgery and recovery. Then we ...were in full Pandemic mode. They were gracious to delay my filing until I was recovered and ready to file. I could not ask for more. The process was over all quick and painless for a simple Bankruptcy like mine. I feel a weight has been lifted and I can rebuild. Thank you for all your arduous work and patience, Gabriel, Ahren, and their teams are knowledgeable and efficient. Read more
Google Review

Katey Huntley

Responsive, friendly, kind, extremely easy to work with! So knowledgeable and made this entire process painless. Very grateful!

Google Review

Lynn Molina

Gabriel Hanna, Esq and the staff at BLC helped me in a very difficult time. I appreciate all the help and care they gave my case.

Google Review

Linda Cramer

I can’t say enough of how much this bankruptcy law firm helped me with my financial situation. They were all so helpful, efficient and made the difficult time and process as quick and easy as possible. I would recommend them to anyone I know and am glad to give my public recommendation as well. T...hey truly deserve a five star plus rating. Read more
Yelp Review

Andrea N.

I am very happy with my experience with BLC. Bankruptcy is not something anyone wants to go through, however everyone at BLC made my experience pleasant and easy. The process was explained thoroughly and I had an easy time reaching out and connecting with my attorney. Anika Renaud-Kim was my attorney ...and she was nothing short of amazing! She was very patient and generous with her time. Ms. Renaud-Kim definitely made me feel at ease and comfortable through the entire process. Read more
Facebook Review

Lidia Paramore

they did a great job for me, helped me anytime I needed something, my Lawyer Gabriel Hanna is the best, gave lots of confidence all the time..thanks BLC I will.always recommend you, I’m very grateful for your service!!!

Yelp Review

Rachael C.

When searching for information I had called a few different firms and received consults. BLC was the only one who didn’t shy away and provided answers and information during the consult. Once I agreed to move forward, they were supportive, informative, and eased my anxiety through the whole process.... I can’t recommend them enough. Read more
Google Review

Emily Martinez

AmazingI had many questions and uncertainties and the carefully explained it all and made it easy to understand. They facilitated a fast and easy process making this scary difficult thing simple

Ready To Eliminate Your Debt?

Bankruptcy is still the best option. Other debt plans make promises, but only bankruptcy delivers.

FREE CASE EVALUATION 

Logo

SAN DIEGO OFFICE

1230 Columbia St. #1100 San Diego, CA 92101

LOS ANGELES OFFICE

11500 Olympic Blvd., 4th Floor Los Angeles, CA 90064

VISTA OFFICE

380 South Melrose Drive #308 Vista, CA 92081
© 2022 Bankruptcy Attorneys. All Right Reserved.

Legal Disclaimer: The Bankruptcy Law Center is a California Licensed law firm with attorneys licensed in the state of CA, NY. Attorney Ahren Tiller is responsible for this advertisement. Bankruptcy Law Center’s principal office is located at 1230 Columbia st. Suite 850 San Diego, CA 92101. Prior results listed on this site do not depict or in any way infer a prediction or outcome.We are a debt relief agency proudly providing options to people with financial problems. View our Privacy Policy