Can You File Bankruptcy on HEAL Loans?

You can discharge Health Education Assistance Loans (HEAL loans) in bankruptcy — but it’s far harder than with other student loans. The law sets a uniquely strict test, and most borrowers don’t qualify. To succeed, you must:

• Wait at least seven years after your repayment period began (not counting deferments or forbearances).

• Prove in court that repayment would be “unconscionable” — a legal term meaning shockingly unfair or outrageously harsh.

• Show that the government has no remaining collection options, such as seizing Medicare reimbursements.

These hurdles explain why discharges are rare. Courts often deny HEAL bankruptcy cases even when borrowers show significant financial hardship.

HEAL loans don’t follow the same bankruptcy rules as most other student loans. Normally, student debt is covered by federal law that requires proving “undue hardship” — usually tested with the Brunner standard.

HEAL loans, however, fall under the Public Health Service Act. In 42 U.S.C. §292f(g), Congress deliberately set a much tougher rule to discourage doctors and other health professionals from walking away from their training debt.

Lawmakers later raised the bar even higher: in 1993, they extended the waiting period from five to seven years before a borrower could even ask a court to consider discharging HEAL loans.

A bankruptcy court can only discharge a HEAL loan if three conditions are met. These requirements come from the same law (42 U.S.C. §292f(g)), and missing even one means the debt remains.

1. The Seven-Year Rule

At least seven years must pass from the date your repayment period began. The clock pauses during deferments or forbearances — so if you postponed payments for a residency, fellowship, or hardship, those months don’t count.

2. The “Unconscionable” Standard

You must show that repayment would be “unconscionable.” This is a stricter bar than the “undue hardship” rule that applies to most student loans. We explain what this means — and how courts apply it — in the next section.

3. Government Collection Rights

Finally, the government must have no remaining collection options. The Department of Education retains rights like seizing Medicare or Medicaid reimbursements. If those rights are still available, a bankruptcy court won’t grant discharge.

Most student loans in bankruptcy require proving “undue hardship,” a tough but sometimes achievable standard. HEAL loans, however, go further. Congress required borrowers to prove repayment would be “unconscionable.”

In plain English, that means:

• Shockingly unfair or beyond reason — not just difficult.

• Circumstances well outside the normal struggles of debt repayment.

• A long-term, extreme inability to ever repay.

How Courts Have Applied It

Courts have enforced this standard harshly.

In In re Rice, (6th Cir. 1996), a borrower with $77,000 in HEAL debt, a modest teacher’s salary, and family expenses still lost. The court ruled his case wasn’t “unconscionable,” defining the term as “outside the limits of what is reasonable or acceptable.”

In Smitley, (4th Cir. 2003), the court echoed that view, stressing that “unconscionable” demands extraordinary, almost hopeless circumstances — far beyond financial hardship.

Together, these cases show how steep the test really is. Judges expect borrowers — even those in tough financial situations — to keep paying unless their circumstances are extreme and permanent.

Related: In re Ronald Rice and HEAL Loan Bankruptcy

Congress assumed borrowers taking out HEAL loans — doctors, dentists, pharmacists, and other health professionals — would eventually earn high incomes. To protect taxpayers, lawmakers made these loans much harder to escape.

They also gave the government extra collection powers, including:

• No statute of limitations.

• Wage garnishment.

• Tax refund and Social Security offsets.

• Medicare and Medicaid payment seizures.

Courts followed that lead. They apply the “unconscionable” standard cautiously and rarely cancel HEAL debt unless a borrower’s situation is both permanent and extreme.

The result: bankruptcy relief for HEAL loans is almost unheard of. For most borrowers, the more practical question is not “Can I file bankruptcy?” but “What other options do I have?”

Since bankruptcy almost never works for HEAL loans, the main solution is consolidation into a Direct Loan. Consolidation can bring a HEAL loan out of default and unlock repayment and forgiveness programs that HEAL loans can’t access on their own.

Other limited options include negotiating a HEAL Loan settlement or disability discharge, though both work differently than they do for regular federal student loans.

For details, see our guide on How to Get Out of Default on HEAL Loans.