Can Student Loans Be Discharged in Bankruptcy?

Student loans can be overwhelming, especially when you get your first job and you are hit with high monthly payments while also paying other day-to-day bills. If you have been going through a hard time financially and are filing for bankruptcy relief, you might be wondering if you are also able to discharge your student loans.

Discharging Student Loans Through Bankruptcy

Discharging student loans during bankruptcy is very difficult, but not impossible. There have been cases where people have been able to get it done, but this is not the norm. Student loans are treated differently during bankruptcy compared to other forms of debt like credit cards or car loans.

This is partly because of a change to the law passed back in 1976 regarding student loans and bankruptcy. These laws were passed to make it harder to get rid of student loans because some said it undermined the federal student loan programs.

Some members of Congress were even concerned that students would graduate with high amounts of student loan debt and then declare bankruptcy as a way to never have to pay the debt back.

As part of the 1976 laws, students have to wait at least 5 years from the time they had to begin paying student loan payments to be able to potentially discharge from bankruptcy. This is the case for every student unless there are serious amounts of hardship that make the student unable to pay back the loans or other debts they may have.

This 5-year rule was later extended to 7 years in 1990 and then to the borrower’s lifetime in 1998. The only exception is what Congress labeled as “undue hardship.” This includes federal student loans and loans given out from private companies.

Do People Discharge Their Student Loans During Bankruptcy?

Although it is difficult, people have been able to discharge their student loans through bankruptcy in the past. The exact success rate is hard to define though because most people do not even try to do it.

If you are thinking of trying to get your loans discharged through bankruptcy, you might need to consider talking to a lawyer. They will be able to help you gather the right paperwork and ensure you can file the proper motion with the right materials in support of your effort.

The first thing you will need to do is prove that your being required to repay the loans would be an “undue hardship.” This can be difficult to do in some cases because the laws do not specifically state what undue hardship is or ways that you can show you are going through it. The federal courts often appears split when trying to determine what undue hardship is, however, there are generally three requirements that need to be proved to increase your chances of getting the loans discharged.

First, the borrower must show that if they are forced to make the student loan payments, they will not be able to have a normal standard of living. This includes not being able to pay bills based on your current income or the income you have the potential to receive in your job.

Second, you must be able to show that you are not able to make the payments for a large portion of the repayment period. Third, you must show that you have tried to make the payments in the past but were not successful.

If the judge and the bankruptcy court decide that you meet all these requirements, they can discharge the student loan debt. Keep in mind that even if you show all the requirements, the court can still decide to reject the motion to discharge the loans if they still feel like there is not enough evidence.

The Future of Discharging Student Loans in Bankruptcy

There are currently new movements to try and get new laws passed in regards to student loan forgiveness and being able to more easily discharge them during bankruptcy. One of the Acts, the Fresh Start Act wants to replace the lifetime ban on discharging loans with just a 10-year ban.

This means you will be able to try and discharge the loans after 10 years of making your first payment. If this law passes, you might be able to get the loans discharged if you can show that making payments on the loans caused undue hardship during the first 10 years of trying to pay them off.

Currently, this act will apply only to federal loans. Private loans have different rules and you will need to talk to the loan provider to see what may happen to the loans in the event that you are filing for bankruptcy.

Under this law, some universities are also in charge of reimbursing the government for the student loans in the event that the student files for bankruptcy. The exact portion that they will be required to pay depends on the cohort default rate and the repayment rate.

Should I File Bankruptcy to Discharge Student Loans?

Filing for bankruptcy is a serious choice and not one that should be made solely to discharge student loans. Seeking relief under the bankruptcy code is not to be sought for light or transient reasons. But with the large amount of student loans that so many people find themselves with after graduating from very expensive higher education institutions, it be worthwhile in the right set of circumstances.

There are some other options you can take such as enrolling in an income drive repayment plan or enrolling in the Revised Pay as You Earn Plan. Both of these allow you to make payments based on your income rather than just having large payments after your grace period ends six months after graduation.

Some loans can also be forgiven after you have worked in public service jobs for 10 years or after you have spent 20 years making payments on the loans.

Contact The Elmer Law Firm Today

If you are facing hardship and think filing bankruptcy is an option for you in regards to student loans, contact Elmer Firm in Tuscaloosa, Jasper & West Alabama today. We can help go over your circumstances and see if filing for bankruptcy in regards to your student loans is a good idea.


bankruptcy, Bankruptcy attorney, student loans

You may also like

{"email":"Email address invalid","url":"Website address invalid","required":"Required field missing"}
kenneth elmer

Call today



Tuscaloosa Office

1927 7th Street, Tuscaloosa, AL, 35401

Jasper Office

1906 Delaware Avenue, Jasper, AL, 35501

Contact Today

Get real help now from an expert local bankruptcy lawyer

elmer law firm