Bankruptcy And Student Loan Forgiveness: Can You Wipe Out Student Loans Through Bankruptcy?

Can Bankruptcy Eliminate Student Loans?

For most borrowers, student loans are notoriously difficult to discharge through bankruptcy; however, it is possible under specific conditions. Borrowers must prove “undue hardship” in court, meaning that repaying the loans would make it impossible to maintain a minimal standard of living.
Recent policy shifts and court decisions have made this process more accessible than ever before, providing financially distressed borrowers with a clearer path toward debt relief.

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Understanding the Basics: How Bankruptcy Works

When filing for bankruptcy, there are two main types for individuals:

• Chapter 7 (Liquidation): Assets may be sold to repay creditors. Most unsecured debts can be discharged, but student loans require a separate hardship proceeding.
• Chapter 13 (Reorganization): Debts are restructured into a manageable 3–5 year repayment plan. Borrowers may request student loan adjustments through this plan.

While bankruptcy clears many forms of consumer debt, student loans remain a special category requiring an additional legal test.

The “Undue Hardship” Standard Explained

To discharge student loans, debtors must meet the Brunner Test, a three-part legal standard that proves:

1. The borrower cannot maintain a minimal standard of living if forced to repay.
2. The financial situation is unlikely to improve soon.
3. The borrower has made good-faith efforts to repay the loans.

This standard has historically been interpreted strictly, but recent Department of Justice guidance (2023–2024) has eased the process by encouraging more consistent and fair evaluations.

Recent Policy Updates: A Shift in Favor of Borrowers

The Biden administration introduced new guidelines to make student loan discharge through bankruptcy more attainable. These updates:

• Allow borrowers to submit a detailed financial declaration during the bankruptcy process.
• Encourage federal attorneys to support discharge requests when evidence clearly meets the undue hardship criteria.
• Aim for a uniform national standard, reducing the inconsistency of court rulings across states.

Borrowers who previously assumed their loans were non-dischargeable are now encouraged to reconsider bankruptcy as an option.

When Bankruptcy May Be a Real Option for Student Debt Relief

Bankruptcy could help if:

• You have low or no income with limited prospects for improvement.
• You’ve tried income-driven repayment or deferment without success.
• You face medical or personal hardships preventing stable employment.
• Your total debt load makes repayment impossible even after budgeting.

In such cases, consulting a bankruptcy attorney can clarify whether your case meets the undue hardship criteria.

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Other Alternatives to Explore Before Bankruptcy

Before filing, borrowers should consider:

• Income-Driven Repayment (IDR): Reduces payments based on income.
• Public Service Loan Forgiveness (PSLF): Forgives loans after qualifying public service work.
• Total and Permanent Disability Discharge (TPD): Eliminates loans if permanently disabled.
• Fresh Start Program (Federal Initiative): Helps defaulted borrowers regain eligibility for repayment and forgiveness plans.

Each option has unique requirements, but a lawyer can help determine the most strategic combination of relief programs.

Why Legal Guidance Matters

Proving undue hardship is a legal process that involves documentation, testimony, and often negotiation with loan servicers or the government.
An experienced bankruptcy attorney:

• Prepares detailed financial evidence supporting hardship claims.
• Navigates court procedures and government guidelines effectively.
• Increases your chance of partial or full loan discharge.

At Gaudiosi Law, clients receive personal guidance backed by years of experience handling complex bankruptcy cases in Glendale and Phoenix, Arizona.

The Bottom Line

While student loans are not automatically cleared through bankruptcy, relief is possible with proper legal representation and supporting evidence.
As bankruptcy laws and federal policies continue to evolve, borrowers now have more hope than ever before for meaningful student debt relief.

If student loans are weighing you down, don’t assume bankruptcy isn’t an option.
Contact Gaudiosi Law today for a confidential consultation. Their team can evaluate your situation and help you pursue real debt relief through bankruptcy in Glendale and Phoenix, Arizona.

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Written by Jim Gaudiosi, Attorney at Law             

Last Updated 16/10/2025