Can student loans be discharged in bankruptcy?
Yes, but it requires proving 'undue hardship' through an adversary proceeding (a lawsuit within the bankruptcy case). While historically difficult, recent DOJ guidance (2022) and growing judicial willingness have made student loan discharge more achievable than many people believe.
What is the Brunner test?
The Brunner test is the most common standard for student loan discharge. You must prove three things: (1) you cannot maintain a minimal standard of living while repaying the loan, (2) your financial situation is likely to persist for a significant portion of the repayment period, and (3) you made good-faith efforts to repay.
What is an adversary proceeding for student loans?
An adversary proceeding is a separate lawsuit filed within your bankruptcy case asking the court to declare your student loans dischargeable due to undue hardship. You must file a complaint, serve the loan holder, and present evidence at trial or negotiate a settlement.
Are private student loans easier to discharge than federal loans?
The same undue hardship standard applies to both. However, some private loans may not qualify for the student loan exception at all if they were not 'qualified education loans' under the tax code. Loans from unaccredited schools or non-degree programs may be dischargeable without proving hardship.
What changed with the DOJ's 2022 student loan guidance?
In November 2022, the DOJ issued guidance directing its attorneys to use a new framework for evaluating undue hardship claims, making it easier for qualifying borrowers to get consent to discharge. The DOJ now considers income, expenses, and circumstances rather than applying the Brunner test rigidly.
Do I need a lawyer to discharge student loans in bankruptcy?
An attorney is highly recommended for adversary proceedings because they involve litigation. However, some debtors have successfully discharged student loans pro se. Legal aid organizations and law school clinics sometimes handle student loan adversary proceedings for free.
Can I get a partial discharge of student loans?
Yes. Courts can grant partial discharge, reducing the loan balance even if they do not eliminate it entirely. Some courts discharge the interest while requiring repayment of principal, or discharge a portion of the total balance based on the debtor's ability to pay.
What evidence do I need for an undue hardship claim?
Key evidence includes: income documentation, medical records showing disability or chronic illness, evidence of job search efforts, documentation of expenses, proof of good-faith repayment attempts, expert testimony about future earning capacity, and age-related factors that limit income growth.
Can I discharge Parent PLUS loans in bankruptcy?
Yes. Parent PLUS loans are subject to the same undue hardship analysis as other student loans. Parents who took out loans for their children's education and now face financial hardship can seek discharge through an adversary proceeding.
What if I have both federal and private student loans?
You can seek to discharge some or all of your student loans. The adversary proceeding can address both federal and private loans, though they may involve different defendants (the DOE for federal, the private lender for private loans). Strategy may differ for each.
Is income-driven repayment better than bankruptcy for student loans?
Income-driven repayment (IDR) plans like SAVE, IBR, and ICR can reduce payments to as low as $0 per month based on income. IDR may be a better option if you do not meet the undue hardship standard. After 20-25 years of payments (10 years for PSLF), remaining balances are forgiven.
How long does a student loan adversary proceeding take?
Adversary proceedings typically take 6-18 months from filing to resolution. Many cases settle before trial as lenders evaluate the strength of the undue hardship claim. The DOJ's 2022 guidance has accelerated settlements in federal loan cases.
Can I discharge student loans if I'm disabled?
Disability significantly strengthens an undue hardship claim. If your disability prevents you from earning enough to repay the loans, courts are much more likely to grant discharge. The DOJ guidance specifically identifies disability as a factor favoring discharge.
What is the 'totality of circumstances' test?
The totality of circumstances test (used in the 8th Circuit and some other courts) is a more flexible alternative to the Brunner test. Instead of three rigid prongs, the court considers all relevant factors including income, expenses, health, age, dependents, and other circumstances.
Has anyone actually gotten student loans discharged?
Yes. Despite the common myth that student loans 'can never' be discharged, thousands of borrowers have obtained full or partial discharge. A 2011 study found that borrowers who actually filed adversary proceedings received some relief about 40% of the time. The success rate has likely increased since the 2022 DOJ guidance.