Yes, student loans can be eliminated in bankruptcy, but it is harder than discharging most other debts. Unlike credit cards or medical bills, student loans are not wiped out automatically. To discharge them, you must show that repaying the loans would cause you “undue hardship,” which requires filing a separate lawsuit within your bankruptcy case called an adversary proceeding. For federal student loans, a review process introduced in 2022 has made this path more predictable than it once was. Law Offices of Terrence Fantauzzi helps California residents understand whether pursuing a student loan discharge makes sense in their situation.
Why Are Student Loans Treated Differently in Bankruptcy?
Federal bankruptcy law places student loans in a special category of debts that are not discharged unless the borrower proves undue hardship. Congress created this rule to discourage people from borrowing for school and then filing bankruptcy shortly after graduating.
As a result, a standard Chapter 7 or Chapter 13 discharge does not cover qualified student loans on its own. Even after your case ends, those loans remain unless the court specifically rules they should be discharged.
What Does “Undue Hardship” Mean?
Courts in California, which are part of the federal Ninth Circuit, generally use a three-part test to decide whether a borrower has shown undue hardship. The court looks at whether:
- You cannot maintain a minimal standard of living for yourself and your dependents if required to repay the loans
- Your financial situation is likely to continue for a significant part of the repayment period
- You have made good faith efforts to repay the loans
Factors such as disability, chronic illness, age, long-term unemployment, or limited earning potential can support a hardship claim. Each case depends on its own facts.
How Does the Federal Student Loan Review Process Work?
In November 2022, the U.S. Department of Justice and Department of Education introduced a standardized process for evaluating federal student loan discharge requests. The government has continued to use it, including a revised version of the attestation form released in 2025.
Here is how it generally works:
- You file an adversary proceeding in your bankruptcy case asking the court to discharge your federal student loans
- You complete a detailed attestation form describing your income, expenses, and repayment history
- Government attorneys review the information using standardized expense guidelines
- If the facts support it, the government may recommend that the court discharge all or part of the loans
The bankruptcy judge still makes the final decision, but the government’s recommendation carries significant weight. This process applies only to federal loans held by the Department of Education, so it is important to confirm who owns your loans before filing.
Can Private Student Loans Be Discharged?
Private student loans are not part of the federal review process. In most cases, discharging a private student loan still requires proving undue hardship in court, and the lender may contest your claim.
However, not every private education loan qualifies for this special protection. Some loans, such as those used for unaccredited programs or for amounts above the cost of attendance, may be dischargeable like ordinary unsecured debt. An attorney can review your loan documents to determine how they would be treated.
Should You File Chapter 7 or Chapter 13 if You Have Student Loans?
You can pursue a student loan discharge in either chapter. The right choice depends on your overall financial picture.
Chapter 7 bankruptcy can quickly eliminate credit cards, medical bills, and other unsecured debts. That alone may free up enough income to make student loan payments manageable, even if the loans themselves are not discharged.
Chapter 13 bankruptcy creates a three-to-five-year repayment plan. Student loans can be included in the plan, and collection on them is generally paused while the case is active. Any remaining balance would still be owed afterward unless a hardship discharge is granted.
Does Bankruptcy Stop Student Loan Collection?
Yes. When you file, the automatic stay temporarily stops most collection activity, including wage garnishment and tax refund offsets related to defaulted student loans. This protection lasts while your case is open, which can give you time to address your finances and explore long-term options.
What Else Should You Consider Before Filing?
Bankruptcy is not the only way to address federal student loans. Income-driven repayment, consolidation, and certain forgiveness programs may offer relief without a court process. A bankruptcy attorney can help you compare these options with the possibility of a hardship discharge.
Keep in mind that filing for bankruptcy does not automatically release a cosigner on a student loan. If someone cosigned your loans, they may still be responsible.
Talk to a California Bankruptcy Attorney About Student Loan Debt
Student loans can feel impossible to escape, but bankruptcy may offer more relief than you expect, whether by discharging the loans or by eliminating other debts that are making repayment unaffordable.
To find out what options may be available to you, contact Law Offices of Terrence Fantauzzi at (909) 552-1238 today.
