You can file bankruptcy on federal and private student loan debt.* But the hurdles are high, and discharges are rare.
When the bankruptcy laws were first created years ago, you could file for bankruptcy and get rid of your student loan debt along with your credit card debt, medical bills, and other consumer debts. But starting in the 1970s, lawmakers slowly began tweaking the Bankruptcy Code to make education loans harder to discharge.
Related: Why Can’t You File Bankruptcy on Student Loans?
Congress didn’t do borrowers any favors when it drafted those laws. It tightened the rules so that only those bankruptcy filers who could show that having to repay their student debt would cause them and their dependents “undue hardship” would be eligible for debt relief.
Unfortunately, Congress didn’t define what undue hardship meant, leaving that task to judges — who also passed on giving it a definition. Instead, the courts created multi-part tests that look at a borrower’s past, present, and future income, living expenses, and repayment history, including requests for deferments, forbearances, and income-driven repayment plans.
Depending on where you live, your bankruptcy judge will use the Brunner Test or the totality-of-the-circumstances test — more on these below.
Learn More: How to Prove Undue Hardship for Student Loans
* It’s often easier to discharge private student loans because many of them — particularly those made before 2010 — arguably aren’t subject to the undue hardship standard. Read more about private student loan bankruptcy.