Here's the bankruptcy process to file an adversary proceeding in bankruptcy to discharge student loans:
- File a chapter 7 or chapter 13 bankruptcy case
- Draft a complaint to discharge your student loans
- Open an adversary proceeding in your bankruptcy case
- File your complaint to discharge your student loans
- Wait for the clerk of the court to generate the summons
- Serve the summons on each loan holder/financial institution
- Proceed with the litigation
- Wait for the bankruptcy judge to decide if your student loans should be discharged (you may get a full discharge or partial discharge)
This process might change a bit if you need to reopen your bankruptcy case before filing your adversary proceeding.
You'll need to reopen your case if you already received a bankruptcy discharge and your bankruptcy case is over.
How to reopen a bankruptcy case
After you get a discharge, you'll need to file a motion to reopen your bankruptcy before you can file your complaint. Reopening your bankruptcy case doesn't affect your discharge. It's a formality that ties your adversary case to your bankruptcy case.
Before preparing and filing the motion, check with the bankruptcy court to see if they have any particular rules you'll need to follow or fees you need to pay or ask be waived.
What is an adversary proceeding for student loans?
An adversary proceeding for student loans is simply a lawsuit in bankruptcy court to discharge student loans.
The rules for adversary proceedings start at Rule 7001 in the Federal Rules of Bankruptcy Procedure.
How to get student loans discharged in bankruptcy?
You can discharge student loans in bankruptcy if you can prove that repayment would cause you and your dependents an undue hardship. The Bankruptcy Code doesn't define undue hardship. So bankruptcy courts determine undue hardship by applying a test.
There's no uniform undue hardship standard or test.
Some courts use the Brunner test. Other courts use the totality-of-the-circumstances test. And other courts use a combination of the two or some other test altogether.
No matter which test is used, bankruptcy courts are typically trying to determine whether you can maintain a minimal standard of living while repaying your student loans.
Because the U.S. Department of Education offers repayment plans based on your income, it's incredibly difficult to prove you can't maintain a minimal standard of living.
Private student loans, on the other hand, typically don't offer affordable monthly payments based on income. Because of that, you may find it easier to get an undue hardship discharge of your private student loan debt (or maybe a partial discharge).
Complaint to determine the dischargeability of student loans
There's no magic complaint that will entitle you to a student loan discharge. That said, there are some things I think any student loan borrower should have in their complaint.
In drafting your complaint, I think you should:
- Demonstrate your current income is not enough to make your student loan payments and cover your living expenses.
- Provide evidence that your expenses are in line with the poverty level guidelines.
- Show that your financial situation is likely to persist for a significant portion of the repayment period.
- Include a record of your certificate of earnings from the Social Security Administration to show your earnings since you started working.
- Demonstrate that before filing bankruptcy, you made a good-faith effort to repay your student loans. You can do this by providing evidence you worked with your student loan creditors and loan servicers to modify the repayment terms, lower the interest rate, request deferments, etc.
- Tell the court of any additional circumstances (child support, permanent disability, age, etc.) that would make repaying your loans an undue hardship.
Does doing all these things guarantee you'll get a discharge? No. But it will help give yourself the best shot at winning.
Check out this sample adversary proceeding complaint to discharge student loans to get an idea of what the process looks like.
Looking for a student loan bankruptcy lawyer?
Let's talk. I know it's incredibly difficult to find a student loan bankruptcy attorney.
Over the past few years, I've helped several student loan borrowers file bankruptcy and get a discharge of their student loans (or at least a really good settlement).