Can I Get My Student Loans Discharged or Reduced for Undue Hardship In Bankruptcy?


Discharging student loans in bankruptcy has always been more difficult than discharging other unsecured debt like credit cards. You have to prove “undue hardship” in a special, additional "adversary proceeding." But navigating this path of extra procedure should be a bit easier in 2023 and beyond, thanks to new Department of Education guidelines telling their lawyers not to challenge debtors seeking undue hardship discharges if they meet specific criteria.



On November 17, 2022 the federal government recently announced a revised way of dealing with student loans in bankruptcy to make it easier for student loan debtors who qualify to get relief in bankruptcy. The program comes in the form of new guidelines for its attorneys dealing with bankruptcy debtors seeking to discharge their student loans.

The new guidelines instruct justice department lawyers to work with the education department in determining which student loan debts should probably be discharged in bankruptcy. has written articles to help you navigate the student loan discharge process in bankruptcy. 

Here you'll learn:

What the new Federal Government treatment of Student Loans in Bankruptcy means for you 

The Supreme Court rejected President Biden's 2022 blanket student loan forgiveness proposal.  And student loan repayment on loans began again in October 2023.

In response, the federal government announced a program to make it easier for student loan debtors who qualify for bankruptcy relief.

On November 17, 2022, the federal government issued new guidelines for its attorneys dealing with bankruptcy debtors seeking to discharge their student loans.

The revised guidelines instruct justice department lawyers to work with the Department of Education in determining which student loan debts should probably be discharged in bankruptcy. This involves the debtor filling out a standardized affidavit about the financial aspects of your undue hardship; the Department of Education lawyers will use this affidavit to determine if a hardship discharge should be recommended via an agreeing to a "stipulation" that the debtor meets the "undue hardship" standard if these criteria in this affidavit are met.

Why should I care about the new government policy?

Until this revision, it's been up to the whim of a judge whether your student loan would be discharged. "Undue hardship" is not defined in the bankruptcy code, so each judge made up their own mind in applying these standards to the facts of each case.

The Problem is, some judges never allow discharges, while others are more generous.

So, under the pre-existing system, it was a crapshoot whether you can eliminate your student loan in bankruptcy — it depends on which bankruptcy judge is assigned to your case. The new system doesn't eliminate that subjectivity entirely, but it does attempt to ensure that standards are applied with certain "defaults" of reasonableness.

How the New System Changes Things

Under these revised Department of Education guidelines, the goal is to make this less of a crapshoot and more based on objective criteria, which can establish a "presumption" of hardship if those factors can be met.

In the past, US Government Department of Education lawyers would object to any attempt to discharge a student loan. Now they are charged with actually recommending a discharge if a debtor's situation meet certain criteria. 

But debtors won't benefit from this unless they follow the proper procedures.

Read on to learn what you need to do to get this relief...

How to Claim Your Right to a Student Loan Hardship Discharge:

Regardless of the new justice department guidelines, bankruptcy law still requires debtors to take an extra step if they want to discharge their student loans:

Student Loans Are Excluded From Regular Bankruptcy Discharge — Unless You File a "Complaint to Determine Dischargeability of a Debt" to Eliminate Them

You must file an "adversary proceeding" — sort of like a mini-lawsuit within the bankruptcy case.

In the case of Student Loans, that adversary proceeding is called a "Complaint to Determine Dischargeability of a Debt" under Bankruptcy Rule 4007, and it must be filed within 60 days of your 341 hearing.

What you need to claim in your "Complaint to Determine Dischargeability."

In your adversary proceeding, you must make the case that you face "undue hardship" and, therefore, are entitled to a discharge of either all or part of your student loan debt.  (11 U.S.C. § 523(a)(8)) (Yes. partial discharges due to "undue hardship" are becoming more common.)

NONE of these rights to discharge of student loan debt are triggered UNLESS you make the effort to start an "adversary proceeding" in your bankruptcy case, to claim your right to an "undue hardship" discharge.

Bankruptcy lawyers typically charge extra if you want them to file an adversary proceeding on your behalf. And it can be expensive,  generally about $2,000.

If a bankruptcy case does not involve student loans, there is often no need to file any extra proceedings beyond your original bankruptcy filing. Most lawyers only include these primary filings when they offer to handle your bankruptcy.

Lawyers typically charge and quite a bit extra to take on this extra work. 

If you hire a lawyer to handle your bankruptcy, discuss this upfront if you have any student loan debt.

Make sure you know whether the lawyer will charge extra to handle your student loan complaint.

New Federal Guidelines are Designed to Streamline The Process

Under the new Federal Guidelines, once you indicate that you're seeking a hardship discharge, the government lawyers will have you fill out a form, an affidavit — kind of like a means test form — and look at your financial data and make a recommendation to the judge as to whether your discharge should be granted, based on the information you put on their form. 

You will submit a "REQUEST FOR STIPULATION CONCEDING DISCHARGEABILITY OF STUDENT LOANS" in which you request the Department of Education to "stipulate" (concede) that you meet the criteria for an undue hardship discharge. And you will include the Undue Hardship Attestation form with that.

Showing "Undue Hardship" Is Not Easy, But Some Have Done It

To discharge a student loan, you must show "undue hardship," which has come to mean a very high bar, generally involving disability.  (Thanks to President Biden's 2021 executive order, permanently disabled borrowers can get their loans discharged.)

Under the existing system, your success depends on which judge you get and where you live.

Whether you succeed in your student loan discharge depends on the judge you get. Some judges won't allow a discharge for undue hardship, absent a showing of a "certainty of hopelessness" — when it comes to paying off the debt.

Some judges only find undue hardship in cases of permanent disability of the debtor and the debtor's children,

Meanwhile, other judges have granted "undue hardship" discharges of vast amounts of student loan debt to perfectly non-disabled, middle-aged debtors.

Some, but not all, judges grant "undue hardship" discharges

if you get a judge who has allowed an undue hardship discharge, read any published court opinions written by your judge on this topic to know what factors they feel are most critical. If you get a judge on the record of allowing such discharges, filing an adversary proceeding to claim undue hardship might find a receptive ear. But you must take care in presenting your case and cover every factor your judge finds most relevant, based on opinions they've written.

The New System is still Judge-dependent, but the Department of Education's recommendations for discharge should carry a lot of weight.

Under the new system, justice department lawyers will screen adversary proceedings brought by student loan debtors and recommend discharge for those who meet three criteria:

1. Present Ability to Pay – Using existing standards developed by the IRS and the information provided by the debtor, the Justice Department attorney will calculate a debtor’s expenses and compare those expenses to the debtor’s income. If a debtor’s expenses equal or exceed the debtor’s income, the Department will determine that the debtor lacks a present ability to pay. 

2. Future Ability to Pay – The Department will then assess whether the debtor’s inability to pay is likely to persist. The Department attorney will presume a debtor’s financial circumstances are not expected to change if certain factors—such as retirement age, disability or chronic injury, protracted unemployment history, lack of degree, or extended repayment status—are present. Where such factors are not present, the Department attorney will assess the facts showing whether the debtor’s inability to pay is likely to persist.

3. Good Faith Efforts – In assessing what courts call the “good faith” standard, the Department will focus on objective criteria reflecting the debtor’s reasonable efforts to earn income, manage expenses, and repay their loan. For example, the Department attorney will consider whether the debtor contacted the Department of Education or their loan servicer regarding payment options for their loan. A debtor will not be disqualified based on past non-payment if other evidence of good faith exists. A debtor will not be disqualified based on not enrolling in an income-driven repayment plan where the debtor was deterred from participating in such a plan or otherwise provides a reasonable explanation for non-enrollment. 

If you can meet these criteria, you may well be able to eliminate most or all of your student loan debt in bankruptcy under the new system. But the final determination will still be up to the judge.



Jurisdictional relevance: US

Legal Consumer - DelawareLaw. The content of this article pertains to all US states and counties.