Student loan bankruptcy cases

Can you bankrupt (discharge) student loans in bankruptcy?   For cases filed after October 7, 1998, Student Loans are dischargeable only if you can prove that having to repay it would impose an "undue hardship" on you (as defined below).

(for cases filed PRIOR TO October 17, 2005, if the PROGRAM under which your student loan is issued, insured, administered is a FOR-profit, PRIVATE (non-government) entity, it may be dischargeable. However, if the program itself, such as LAL, GSL, etc. receives nonprofit funding by participation of nonprofit entities, the loan is not dischargeable in bankruptcy.  For cases filed prior to October 7, 1998, student loans were dischargeable if they were in repayment status for a certain period of time).

Please note that although this is put in the Chapter 7 section of my site, the same test applies under any bankruptcy chapter, including 13 and 11.   Student and educational loans can only be discharged in bankruptcy if the following can be proven at trial.


To obtain a discharge based on undue hardship in the Ninth Circuit (which includes California) you must prove all of the following:

1.  that you cannot maintain, based on current income and expenses, a 'minimal' standard of living for yourself and your dependents if forced to repay the loans; 

This is usually the easiest prong to satisfy.

2.  that additional circumstances exist indicating that this state of financial affairs is likely to persist for a significant portion of the repayment period of the student loans; and,

3.  that you made good faith effort to repay the loans.

This does not just include making payments on the loans.  It requires doing things over time such as making efforts to increase your income (which includes going back to school to get additional degrees or experience), consolidating loans with the Direct Loan Servicing Center, and other similar efforts.  

The above is known as the "Brunner Test" named after an appeals court decision by that name.

Courts do have the authority to issue partial discharges of student loans, in cases where the debtor shows the ability to repay some, but not all, of the loans. T his is a huge improvement in the ability to possibly discharge some of these debts, but all three of the above factors must be still be met.   It is very difficult to prove all the necessary elements.

HEAL Loans are subject to a higher standard of scrutiny than regular student loans and are even harder to discharge.

Important Student Loan Resources:

For other resources to deal with Student Loans, including income contingent repayment plans, and non-bankruptcy methods of canceling the debt, see the Student Loan Borrower's Assistance page or another resource can be found at the department of education site at  http://www.ed.gov/offices/OSFAP/DCS/loan.cancellation.discharge.html

To see more about how courts in the ninth circuit analyze the undue hardship Brunner test in bankruptcy, please see the following cases:

To see how certain student loans may be dischargeable if they are funded fully by a private institution, and not through any government program,  for bankruptcy cases filed PRIOR to October 2005:

see In re Pilcher.