What Happens to Student Loans in Chapter 13 Bankruptcy

In Chapter 13 bankruptcy, student loans are not discharged, but collection activity stops while the case is active. Federal student loans are placed into administrative forbearance, interest continues to accrue, and payments may pause or be reduced depending on how the plan is structured.

What matters most for borrowers with federal student loans is how Chapter 13 affects progress toward forgiveness. Time spent in the case can count toward income-driven repayment forgiveness, and there are limited paths to preserve Public Service Loan Forgiveness credit. The full balance survives when the case ends unless a separate undue-hardship discharge is granted.

Related: Are Student Loans Discharged in Bankruptcy?

In Chapter 13, student loans are classified as nonpriority, nonsecured, nondischargeable debt. That classification controls what the bankruptcy can and cannot do.

Once the case is filed:

• The automatic stay takes effect. Wage garnishment, lawsuits, and collection calls stop.

• Student loans are not discharged through the Chapter 13 process. Discharge requires a separate adversary proceeding proving undue hardship.

• Interest continues to accrue while the case is pending.

• The full balance remains legally owed when the case ends, reduced only by whatever payments were made during the plan.

Chapter 13 does not convert student loans into priority debt, secured debt, or dischargeable debt. It temporarily stops collection and reallocates payment obligations during the plan period. The underlying enforceability of the loans does not change.

Federal and private student loans share this nondischargeable status. Where they differ is in how payments, servicing, and repayment resume after the case — and in whether time spent in Chapter 13 can count toward forgiveness.

Related: What It Takes to Obtain an Undue Hardship Discharge

When a Chapter 13 case is filed, federal student loans are placed into administrative bankruptcy forbearance under 34 C.F.R. § 685.205(b)(6)(viii). This happens automatically. It is not a borrower election and does not depend on how the plan is structured.

While loans are in bankruptcy forbearance:

• Required monthly student loan payments are suspended.

• Missed payments are not reported as delinquent.

• Interest continues to accrue, increasing the outstanding balance.

• Collections remain paused under the automatic stay.

Forbearance prevents default during the case, but it does not reduce the debt. In a five-year plan, unpaid interest can add thousands to the loan balance.

The forbearance designation also determines how the Department of Education treats the time spent in Chapter 13 for purposes of forgiveness credit — a distinction that matters differently for IDR forgiveness, PSLF, and RAP.

Related: How Private Student Loans Differ in Bankruptcy Treatment

Federal regulation gives borrowers in Chapter 13 a month of credit toward income-driven repayment forgiveness for each month they make a required plan payment — even if no student loan payment is made during the case. This is the one place where time in a Chapter 13 case works in the borrower’s favor, and the provision survived the litigation that vacated the rest of the 2023 repayment rule.

The governing provision is 34 C.F.R. § 685.209(k)(4)(iv)(K), which states that a borrower receives IDR forgiveness credit by deferring or forbearing monthly payments under a bankruptcy forbearance on or after July 1, 2024, if the borrower made the required payments on a confirmed bankruptcy plan.

The RISE final rule, published at 91 Fed. Reg. 23768 (May 1, 2026) and effective July 1, 2026, carried this provision forward for borrowers in PAYE, ICR, and IBR. This provision does not apply to the SAVE plan, which has been phased out under RISE and replaced by the Repayment Assistance Plan (RAP).

The vacatur did not take this provision with it. The credit originated in the 2023 income-driven repayment rule, and a court did vacate that rule — but it carved this provision out by name. The final judgment in State of Missouri v. Trump, No. 4:24-cv-00520-JAR (E.D. Mo. Mar. 10, 2026), vacated the SAVE Plan Final Rule “with one exception,” and the exception is “the provision concerning the periods of deferment or forbearance that are eligible for income-driven repayment plans, which is codified at 34 C.F.R. § 685.209(k)(4)(iv), which took effect on July 1, 2024, and the legality of which was never challenged in this case. That provision will remain in effect.” The bankruptcy credit at (K) sits inside that carved-out paragraph, so it was never vacated, and RISE carries it forward. The same order vacated every prior order in the case, which supersedes the August 2024 injunction that some secondary sources — including the National Consumer Law Center’s article on this subject — still describe as reaching this credit. Documenting every plan payment still matters, because the credit has to be claimed after the case ends rather than applied automatically.

In practice, this means:

• A borrower earns one month of IDR forgiveness credit for each month a required Chapter 13 plan payment is made.

• Credit accrues even if the loan remains in bankruptcy forbearance and the Department of Education receives no distribution through the plan.

• IDR enrollment before or during the case is not required. The credit is tied to plan payments, not to the borrower’s repayment plan status.

• Completion of the full plan is not required. If a borrower makes 24 payments under a 60-month plan before the case is dismissed, those 24 months count. A dismissed case does not erase the credit already earned — the Department of Education awards credit for each month a plan payment was actually made, regardless of how the case ends.

• Separate classification of student loans in the plan is not required. The borrower earns credit even if the Department of Education is treated the same as other nonpriority unsecured creditors.

Credit is typically applied after the case ends, once the loan servicer receives documentation that the required plan payments were made. The Department of Education does not automatically audit open Chapter 13 cases. Post-case verification is usually necessary.

What to do after the case closes. The Chapter 13 trustee files a Uniform Final Report that lists the number of monthly payments made. A copy of this report should be provided to the borrower’s student loan servicer. If the servicer does not apply the credit, the borrower can request that the bankruptcy court issue an order confirming the number of plan payments made, including in a reopened case.

Related: How Income-Driven Repayment Forgiveness Works

Public Service Loan Forgiveness operates under different rules than IDR forgiveness, and bankruptcy forbearance is not treated the same way.

Under the RISE final rule, bankruptcy forbearance is not listed as an automatic PSLF qualifying deferment or forbearance month in amended 34 C.F.R. § 685.219(c)(2)(v). That means time spent in Chapter 13 does not automatically count toward the 120 qualifying payments required for PSLF — even if the borrower is working full-time for a qualifying employer the entire time.

This is the gap that costs borrowers the most. A five-year Chapter 13 plan can wipe out 60 months of potential PSLF progress if the borrower does nothing to preserve it.

What About Buyback?

One provision looks like it should rescue these months, and it is worth understanding why we do not tell borrowers to count on it. Amended 34 C.F.R. § 685.219(g)(6) — the PSLF buyback rule — lets a borrower obtain credit for months spent in a deferment or forbearance not listed in § 685.219(c)(2)(v), if:

• the borrower was working full-time for a qualifying employer during the forbearance, and

• the borrower either makes the required additional payment or otherwise qualifies for a $0 IDR payment for the month.

A bankruptcy forbearance is not listed in § 685.219(c)(2)(v), so on the face of the regulation buyback appears to reach it.

The Department does not appear to administer it that way. Its published buyback exclusions treat months spent in bankruptcy as outside the program, alongside months in school, in grace, in default, and in disability monitoring, and we have not seen a bankruptcy-month buyback approved. We are not saying the Department has prohibited it — we are saying the printed rule and the stated practice point in opposite directions, and a borrower who plans on buyback rescuing a five-year Chapter 13 is planning on something that has not been shown to work. Note also that § 685.219(g)(6) excludes any period the borrower was repaying under the Repayment Assistance Plan, so a borrower on RAP has neither automatic credit nor a buyback route.

PSLF credit during Chapter 13 is therefore better protected than recovered. A borrower who wants those months to count should be enrolled in and paying a qualifying repayment plan during the case rather than counting on buying the months back afterward.

What This Means in Practice

A borrower who files Chapter 13, works for a qualifying public service employer throughout the case, and makes the required plan payments earns IDR forgiveness credit for those months, but will not earn PSLF credit for them unless they take additional steps. Do Chapter 13 payments count toward PSLF? covers those steps — the plan provisions that keep the clock running, and what is still available mid-case. The distinction between the two tracks is critical and is not something most bankruptcy attorneys are advising on.

Related: How Public Service Loan Forgiveness Works

The Reimagining and Improving Student Education (RISE) final rule introduces the Repayment Assistance Plan (RAP), which replaces SAVE and provides a 360-month (30-year) forgiveness timeline.

For RAP’s forgiveness count, amended 34 C.F.R. § 685.209(k)(8) includes certain pre-July 1, 2026 deferment or forbearance months — including a bankruptcy forbearance on or after July 1, 2024, if the borrower made the required payments on a confirmed bankruptcy plan.

This provision captures borrowers who were in Chapter 13 between July 1, 2024 and June 30, 2026, and made their required plan payments during that window. Those months count toward RAP’s 360-month forgiveness timeline.

After June 30, 2026, that credit stops — and the regulation is explicit about it, not ambiguous. The RAP list admits deferment and forbearance months only through a subparagraph that opens “A month that ended before July 1, 2026,” so a month in bankruptcy forbearance ending on or after that date earns no RAP credit at all. The income-driven credit provision at § 685.209(k)(4)(iv)(K) does not fill the gap either: § 685.209(k)(4) opens “For the PAYE, ICR, and IBR plans” and does not reach RAP. There is nothing here for a servicer to confirm.

The consequence is easy to miss and expensive. RAP is where post-2026 borrowers land, and where legacy borrowers are pushed when PAYE and ICR sunset in 2028. A borrower on RAP whose Chapter 13 case is pending after June 30, 2026 earns no passive forgiveness credit for those months — and, as described above, no PSLF credit and no buyback route either. For those borrowers, actually being enrolled in and paying a qualifying plan during the case is the only mechanism that earns credit.

Bankruptcy forbearance suspends the borrower’s required monthly student loan payments, but the confirmed plan determines whether any payments are still made toward the loans during the case. There are three common structures:

No student loan payments during the plan. The loans sit in forbearance and the plan directs all disposable income to other creditors. This is the simplest structure and provides maximum short-term cash flow relief, but the loan balance grows from accrued interest.

Pro-rata payments through the trustee. The plan treats student loans the same as other nonpriority unsecured claims, and the trustee distributes a proportional share. These payments reflect plan feasibility, not loan terms, and are typically less than the borrower’s pre-filing monthly amount.

Full contractual payments through the plan or directly to the servicer. Less common, but sometimes used when the borrower wants to maintain progress on a specific repayment plan. Local practice and confirmation requirements vary.

The choice of plan structure affects forgiveness strategy. For IDR forgiveness credit, it does not matter — the borrower earns credit from plan payments regardless of how much reaches the student loan servicer. For PSLF, the structure matters more, because PSLF credit during the case comes from being in a qualifying repayment plan, not from the bankruptcy. A borrower who is actually enrolled in and paying an income-driven plan during the case earns PSLF credit for each qualifying month, and a $0 income-driven payment counts — $0 is the full scheduled amount due, which is what § 685.219(c)(2)(i) asks for. What the plan structure cannot do is create a buyback route. As described above, § 685.219(g)(6) reads on its face as though it reaches a bankruptcy forbearance, but the Department’s published exclusions point the other way: the printed rule and the stated practice point in opposite directions, and buyback has not been shown to work for months spent in bankruptcy forbearance.

Yes. Student loans can be included in a Chapter 13 plan, but inclusion affects how the debt is treated during the case, not whether it is discharged.

Including student loans means the debt is accounted for under the plan’s provisions for nonpriority unsecured claims. The plan may provide for payments to the student loan holder, or it may acknowledge the debt while making no payments during the case. Either way, any unpaid balance remains enforceable after the case ends.

Separately classifying student loans is not required, and doing so can raise confirmation issues if it appears to unfairly favor them over other unsecured creditors. Courts vary on how they evaluate this issue.

For IDR forgiveness credit under the RISE rule, separate classification is unnecessary. The borrower earns credit even if the Department of Education receives the same pro-rata distribution as other nonpriority unsecured creditors — or no distribution at all.

Related: How Bankruptcy Affects a Student Loan Cosigner

Most bankruptcy attorneys understand how Chapter 13 treats student loans as nonpriority unsecured debt. What many do not know is how the plan interacts with federal forgiveness programs. Before filing, the borrower should confirm the following with their bankruptcy attorney and student loan lawyer:

Loan type. Only federal Direct Loans are eligible for IDR forgiveness credit, PSLF, and RAP. FFEL and Perkins loans must be consolidated into a Direct Consolidation Loan first. Consolidation is simpler before filing — it can be done during an active case, but it changes the creditor on the claim and may require coordination with the trustee. Private student loans are not eligible for any federal forgiveness program.

Current repayment plan. The borrower’s pre-filing repayment plan determines whether IDR forgiveness credit was already accruing and how the post-case transition will work. Enrolling in an IDR plan before filing simplifies the post-case recertification.

Servicer status. When the case is filed, the servicer will place the loans in bankruptcy forbearance. After the case, the borrower will need to recertify income and family size to resume an IDR plan. Knowing the servicer and having account access before filing reduces delays.

Forgiveness goal. The strategy differs depending on whether the borrower is pursuing IDR forgiveness (20 or 25 years), PSLF (120 payments while working for a qualifying employer), RAP (360 months), or some combination. IDR credit accrues automatically from plan payments. PSLF credit requires additional steps. The bankruptcy attorney and student loan lawyer should coordinate on plan design with the forgiveness goal in mind.

Plan provision. Consider including a nonstandard provision in the confirmed plan requiring the Department of Education and the loan servicer to apply IDR forgiveness credit under 34 C.F.R. § 685.209(k)(4)(iv)(K) for each month the borrower makes a required plan payment. This creates an enforceable court order if the servicer fails to apply the credit after the case closes.

When a Chapter 13 case is completed or dismissed, student loans exit bankruptcy status and return to normal servicing.

For Federal Student Loans

• Bankruptcy forbearance ends and regular billing resumes.

• Accrued interest is applied according to the loan’s terms.

• Repayment status resets, which may require income recertification if the borrower enters or resumes an IDR plan.

• IDR forgiveness credit for time spent in Chapter 13 is typically applied after the case ends, once the servicer receives documentation of plan payments made. The trustee’s Uniform Final Report is the primary verification document.

For borrowers pursuing PSLF, the post-case period is when the PSLF qualifying payment count should be reviewed, and an Employment Certification Form should be submitted covering the full period of employment during the case. Do not assume the buyback program will restore months lost to bankruptcy forbearance — for the reasons described above, those months fall within the exclusions the Department has published, and recovery has not been shown to work.

For Private Student Loans

• Billing resumes immediately after the case ends.

• Accrued interest may be capitalized if the loan contract permits.

• The lender regains the ability to pursue collection if payments are missed.

The primary post-bankruptcy risk is payment shock. A borrower who made no student loan payments during the plan may face a higher balance and a full monthly payment once the case closes. Planning for the post-case transition should begin before the case ends, not after.

Related: What Repayment and Credit Recovery Look Like After Chapter 13 Ends