Student Loan Discharge in Bankruptcy:
The Brunner Test and Beyond

The Legal Foundation: Section 523(a)(8)

The Bankruptcy Code does not make student loans nondischargeable -- it makes them harder to discharge. The distinction matters.

The critical phrase is "unless excepting such debt from discharge would impose an undue hardship." Congress did not define "undue hardship" -- leaving it to the courts. Two main tests have emerged.

The Brunner Test: Three Prongs

The Brunner test comes from Brunner v. New York State Higher Education Services Corp., 831 F.2d 395 (2d Cir. 1987). It is the dominant standard, used by the majority of federal circuit courts.

Criticism of the Brunner Test

The Brunner test has been widely criticized as too rigid. The second prong -- requiring proof that financial hardship will persist -- has been interpreted by some courts to require near-total hopelessness. Critics argue this goes far beyond what Congress intended when it used the phrase "undue hardship."

Even the judge who decided Brunner, Judge Keenan, applied it to deny discharge in a case where the debtor filed bankruptcy just months after graduating and before even beginning to look for work. The facts of Brunner itself were extreme, but the test it created has been applied far more broadly than the original case warranted.

The Alternative: Totality of the Circumstances

The First and Eighth Circuits reject the Brunner test in favor of a "totality of the circumstances" approach. Under this standard, courts consider all relevant factors holistically rather than requiring the debtor to satisfy three rigid prongs.

Factors courts consider include:

• The debtor's past, present, and reasonably reliable future financial resources
• The debtor's and dependents' reasonably necessary living expenses
• Any other relevant facts and circumstances
• The debtor's age, health, and number of dependents
• Whether the debtor maximized income potential
• Whether the debtor's expenses are reasonable
• Whether the debtor's financial difficulties are likely to continue

This test is generally considered more debtor-friendly because it allows the court to weigh the complete picture rather than requiring rigid satisfaction of each prong.

The 2022 DOJ Guidance: A Sea Change

In November 2022, the Department of Justice and Department of Education issued joint guidance that fundamentally changed how the federal government handles student loan discharge cases.

What Changed

• Attestation form: Debtors can complete a standardized form describing their financial situation, submitted through their bankruptcy case.
• DOJ analysis: Rather than automatically opposing discharge, DOJ attorneys now evaluate the debtor's circumstances under a practical framework.
• Recommendation to the court: If the DOJ's analysis supports discharge, it recommends discharge to the court instead of fighting the debtor.
• Faster resolution: Cases that previously required full adversary litigation can now be resolved by agreement, saving time and money for everyone.

The DOJ's Evaluation Factors

The DOJ guidance evaluates undue hardship by looking at:

• Whether the debtor's income is at or below the poverty level
• Whether the debtor has a disability or chronic health condition
• Age of the debtor and years until retirement
• Whether the debtor is on an income-driven repayment plan with a $0 payment
• Length of time in repayment and total amounts already paid
• Whether the debtor obtained a degree or benefited from the education

The Adversary Proceeding Process

Unlike other debts that are automatically discharged, student loan discharge requires filing a separate lawsuit within your bankruptcy case.

Step by Step

1. File your bankruptcy case (Chapter 7 or Chapter 13) in the normal way.
2. File an adversary proceeding complaint against each student loan holder/servicer. This is a separate filing with its own case number. Filing fee: approximately $350.
3. Serve the complaint on the defendant (the loan holder or DOE).
4. Complete the DOJ attestation form (for federal loans) and submit it through your case.
5. Wait for the DOJ's analysis. If they support discharge, the case may resolve by stipulation.
6. If contested: Discovery, potentially a trial before the bankruptcy judge.
7. Court enters judgment -- full discharge, partial discharge, or denial.

Timing Considerations

You can file the adversary proceeding at any point during your bankruptcy case. In Chapter 7, most practitioners file it early. In Chapter 13, some wait until the end of the plan to demonstrate years of good-faith repayment effort. There is no specific deadline, but the adversary proceeding must be filed while the bankruptcy case is open.

Which Test Applies? Circuit-by-Circuit

Partial Discharge and Other Outcomes

Courts are not limited to all-or-nothing outcomes. Available relief includes:

• Full discharge: All student loan debt eliminated.
• Partial discharge: Court reduces the total amount owed. Increasingly common.
• Discharge of some loans: If you have multiple loans, the court may discharge some but not others based on the circumstances of each.
• Modified repayment terms: Some courts have reduced interest rates or modified repayment terms as an alternative to discharge.
• Settlement: The creditor (often the DOJ for federal loans) may agree to a reduced payoff amount.

Private Student Loans

The DOJ guidance applies only to federal student loans. Private student loans are also subject to the undue hardship standard under Section 523(a)(8), but the creditor is a private lender rather than the federal government.

Key differences for private loans:

• No DOJ attestation process -- you must litigate directly against the lender.
• Private lenders may be more aggressive in opposing discharge.
• However, private lenders also have smaller legal budgets and may settle to avoid litigation costs.
• The same undue hardship standard applies -- Brunner or totality of circumstances, depending on your circuit.

Practical Advice

Building Your Case for Discharge

• Apply for income-driven repayment (IDR). If your payment is $0 or nominal, this strongly supports Prong 1 (minimal standard of living) and Prong 3 (good faith).
• Document everything. Medical records, disability determinations, unemployment records, rejection letters -- all support Prong 2 (persistence).
• Do not ignore the loans. Communicate with servicers, apply for deferment or forbearance when needed, and explore repayment options. This builds the good-faith record.
• Consider timing. The longer the gap between when you took the loans and when you file, the stronger your case. Filing decades after graduation with a history of unsuccessful repayment is much stronger than filing immediately after school.
• Get legal help. The adversary proceeding is a real lawsuit. Legal aid organizations, law school clinics, and some bankruptcy attorneys handle these cases pro bono or on a contingency basis.

Frequently Asked Questions