Do Student Loans Qualify for Bankruptcy?

To directly answer the question, student loans can be discharged in bankruptcy. This topic came arose in the news last year, when the Department of Education released an official policy position on July 7, 2015 when it stated that it would not oppose the discharge of government backed student loans in bankruptcy proceedings if the repayment would incur an undue hardship on the student. While this is good news, in many ways it does not little to change the law or the practical application of the law to tens of thousands of students who are straddled with undue student loan debt. To begin with, the primary case that deals with student loan discharge in bankruptcy, Brunner v. New York Higher Education Services, 831 F.2d 395 (2nd Cir. 1987), largely address the same factors. As such, the law itself is certainly not changing as a result of the Department of Education’s policy position. What will change, however, is the practical application of the law.


The Brunner test is fairly simple to understand. If a debtor satisfies the Brunner test, he/she will be able to receive a discharge from the bankruptcy Court for their student loans. The Brunner test requires a debtor to prove three things.

  1. You cannot maintain a minimal standard of living based on current income and expenses if forced to repay the loan; and
  2. Their financial situation is not likely to change in the foreseeable future; and
  3. The debtor made good faith efforts to repay the loan.

Colorado is part of the Tenth Circuit which has adopted the three-prong test of Brunner. Coll. Assist v. Gubrath, 526 B.R. 863 (D. Colo. 2014).


In order to satisfy the Brunner test, your attorney must file a complaint to determine the dischargeability of the student loan debt. It is an adversarial proceeding that requires a debtor to satisfy the above Brunner test criteria. For sure a good experienced attorney is needed to address all of the above. What will make a world of difference, however, is if your attorney negotiates directly with the Department of Education prior to filing or soon after filing to address the issue of “undue hardship“. If the Department of Education agrees that the specific facts of your case would amount to undue hardship if you are required to repay the student loans, then there would be consent and a trial on the issue of dischargeability of student loans would be avoided. You would have your peace of mind knowing that your student loans will be discharged in bankruptcy and the whole matter will resolve itself in a short period of time.


The Department of Education has now determined that if you are totally and permanently disabled and receiving Social Security disability benefits, you may have your student loans cancelled under certain circumstances. This will result in over 7 billion dollars in federal student loan forgiveness, without the need to file a complaint as part of a bankruptcy proceeding.

The attorneys of Long & Long, P.C. have decades of combined and individual experience representing both debtors and creditors in any factual or legal situation involving bankruptcy. In any case you need the most experienced and skilled bankruptcy attorney possible. Long & Long, P.C. can be reached at (303) 832-2655.