Can You File Bankruptcy on Student Loans?

Welcome to an article that aims to answer a question that plagues many Americans who struggle with student loan debt: Can you file bankruptcy on student loans? The reality is that student loan debt can be one of the biggest financial burdens for most graduates in the United States, and the high-interest rates associated with the loans can quickly snowball into an unmanageable amount. According to the Federal Reserve, Americans currently owe more than $1.7 trillion in student loan debt, and this number is only increasing with every passing year.

One of the ways that many people try to tackle their student loan debt is by filing for bankruptcy. While filing for bankruptcy can be a viable option for many types of debts, including credit card debt and medical bills, student loan debt is treated differently. In this article, we will explore the pros and cons of filing for bankruptcy on student loans, the current legal status of student loan debt in bankruptcy cases, how to file for bankruptcy on student loans, and alternative options for managing your student loan debt.

The Pros and Cons of Bankruptcy on Student Loans: A Comprehensive Guide

Before we delve into the specifics of filing for bankruptcy on student loans, it is essential first to understand bankruptcy and its types. Bankruptcy is a legal process that allows individuals, families, or businesses to get relief from debts that they are unable to pay back. There are two primary types of bankruptcy for individuals: Chapter 7 and Chapter 13. A Chapter 7 bankruptcy eliminates all unsecured debts, while a Chapter 13 allows debtors to reorganize their financial affairs and pay back all or part of their debts over time.

Bankruptcy on student loans is complicated, and it usually only occurs in extreme circumstances because it is hard to prove a “hardship” that makes a borrower eligible to discharge their student loan debt. With that said, filing for bankruptcy on student loans has both pros and cons. On the one hand, bankruptcy can relieve borrowers of their liability to repay their student loan debt. On the other hand, filing for bankruptcy can have a lasting impact on your credit score and make it challenging to secure future loans. Additionally, filing for bankruptcy also has tax implications.

Student Loan Debt and Bankruptcy: What You Need to Know

One of the most significant challenges of filing for bankruptcy on student loans is that it is not easy to qualify for it. In 1976, Congress added an exception to bankruptcy discharge that made most student loans exempt from discharge. This means that most federal and private student loans cannot be wiped out in bankruptcy cases unless the debtor can show “undue hardship.” But what does “undue hardship” mean, and how can it be proved?

To prove undue hardship, a debtor must show that repaying their student loan debt would cause them and their dependents to experience an “undue hardship.” This can be achieved by meeting the criteria established by what is known as the Brunner test, which requires three factors to be met: a) the debtor cannot maintain a minimal standard of living based on their current income and expenses if they are required to repay the loans; b) the debtor’s financial situation won’t change in the foreseeable future; and c) the debtor has made a good faith effort to repay the loans. Proving undue hardship is challenging and requires a thorough understanding of the bankruptcy laws and how the court treats student loan debts.

How to File Bankruptcy on Student Loans and What It Means for Your Credit

If you are considering filing for bankruptcy on student loans, it is crucial to understand the procedures involved and how it can impact your credit score. The first step is to hire a bankruptcy attorney who specializes in helping clients navigate the bankruptcy system. The attorney will help you prepare and file a petition with the bankruptcy court, which will include information about your income, expenses, assets, liabilities, and any outstanding debts. Once you file a bankruptcy petition, an “automatic stay” will be issued, which will prevent any collection activity against you, including wage garnishments, phone calls, and letters from creditors.

When you file for bankruptcy, your credit score will take a hit. How much it is affected depends on how good your credit score was before filing for bankruptcy. According to FICO, a bankruptcy filing can lower your credit score by as much as 200 points. However, the impact of bankruptcy on credit scores is usually not permanent, and it is possible to rebuild your credit over time with consistent and responsible credit use.

The Long-Term Consequences of Filing Bankruptcy on Student Loans

While bankruptcy can provide borrowers with a fresh financial start, it can have long-term consequences on their financial future. One of the main challenges is that bankruptcy makes it harder to secure future loans, including credit cards, mortgages, and auto loans. Lenders view bankruptcy as a significant red flag and may perceive borrowers who have filed for bankruptcy as high-risk borrowers, which can result in higher interest rates and stricter lending terms.

Another long-term consequence of bankruptcy is that it stays on your credit report for seven to ten years, depending on the chapter you filed under. This means that even after your credit score has improved, lenders will still see that you filed for bankruptcy in the past.

Navigating the Bankruptcy System: Finding Relief for Student Loan Debt

If you’re considering filing for bankruptcy on student loans, it’s essential to work with an experienced bankruptcy attorney who understands the nuances of the bankruptcy system. Many attorneys specialize in helping clients navigate the bankruptcy system, and they can provide invaluable support and guidance throughout the process. Additionally, there are several resources available to borrowers struggling with their student loan debt, including the U.S. Department of Education’s office of Federal Student Aid and the National Foundation for Credit Counseling.

Some law firms focus on student loan bankruptcy since it can be difficult to know what to do next after understanding that student loan debt creates significant debt. Bankruptcy law experts help individuals understand their rights and options while navigating the process of discharging their student loans.

Alternative Options to Bankruptcy for Managing Your Student Loan Debt

While bankruptcy can provide relief for some student loan borrowers, it should generally be considered a last resort option. There are many alternatives available for managing your student loan debt, including loan consolidation, income-driven repayment plans, and loan forgiveness programs. Loan consolidation involves combining multiple student loans into a single loan, with a single monthly payment. Income-driven repayment plans are based on income, ensuring that your monthly payments are manageable. Loan forgiveness programs offer forgiveness options for borrowers working in certain professions, such as teachers or medical professionals.

Additionally, some borrowers may be eligible for deferment or forbearance, which allows them to temporarily pause or reduce their monthly payments. These options are generally preferable to bankruptcy because they do not have the same long-term consequences and can help borrowers avoid bankruptcy altogether.


In conclusion, can you file bankruptcy on student loans? The answer is that it is complicated. While it is possible to discharge student loan debt in bankruptcy, it is challenging, and you need to qualify for it. Bankruptcy should always be considered a last resort option and only pursued after all other options have been exhausted. If you are struggling with your student loan debt, there are several resources available to help you manage your debt and avoid bankruptcy. Speak to a debt attorney or credit counselor, explore loan forgiveness programs and income-driven repayment options, and try to work with your lender to find a manageable repayment plan. Remember, filing for bankruptcy is never an easy solution, and it should never be approached lightly.

By Riddle Reviewer

Hi, I'm Riddle Reviewer. I curate fascinating insights across fields in this blog, hoping to illuminate and inspire. Join me on this journey of discovery as we explore the wonders of the world together.

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