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.

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 Revised Annual Payment (RAP) plan.

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.

The Safety Valve

The RISE final rule includes a limited path to earn PSLF credit during bankruptcy forbearance. Amended 34 C.F.R. § 685.219(g)(6) provides that a borrower who was in a deferment or forbearance not listed in § 685.219(c)(2)(v) — which includes bankruptcy forbearance — may still receive PSLF credit for that period 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.

For a borrower in Chapter 13 whose income is low enough to produce a $0 IDR payment, this provision can preserve PSLF credit during the case. But the borrower has to know the option exists and take steps to claim it.

The PSLF Buyback Option

For months already lost to bankruptcy forbearance, borrowers may be able to recover PSLF credit through the buyback program. Under the buyback, a borrower can purchase qualifying payment credit for months spent in an ineligible deferment or forbearance status by making a payment equal to what the borrower would have owed under their qualifying repayment plan for each month being purchased.

This is most valuable for borrowers who were close to 120 qualifying payments when they filed Chapter 13 and exited the case with a gap in their PSLF count.

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 will earn IDR forgiveness credit automatically — but will not earn PSLF credit unless they take additional steps. 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 Revised and Improved Student Education (RISE) final rule introduces the Revised Annual Payment (RAP) plan, 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.

For Chapter 13 cases filed after July 1, 2026, the text of the regulation is less clear on whether bankruptcy forbearance months will automatically count toward RAP forgiveness. Borrowers in new cases should confirm whether the IDR forgiveness credit provision in § 685.209(k)(4)(iv)(K) applies to RAP on the same terms as PAYE, ICR, and IBR.

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: if the borrower’s income produces a $0 IDR-equivalent payment, the § 685.219(g)(6) safety valve may preserve PSLF credit during the case.

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. If months were lost to bankruptcy forbearance, the buyback program may allow recovery of those months. An Employment Certification Form should be submitted covering the full period of employment during the case.

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