Student Loans and Bankruptcy in San Antonio

Student loans are generally not discharged in bankruptcy, but there are exceptions and strategies worth understanding.

The General Rule

Under 11 U.S.C. section 523(a)(8), student loans are presumed non-dischargeable. To discharge them, you must file a separate lawsuit within your bankruptcy case called an "adversary proceeding" and prove "undue hardship."

The Undue Hardship Standard

Most courts use the three-part Brunner test:

  1. You cannot maintain a minimal standard of living for yourself and your dependents if forced to repay
  2. Your financial situation is likely to persist for a significant portion of the repayment period
  3. You have made good-faith efforts to repay the loans

Some courts are becoming more flexible, and the DOJ issued updated guidance in 2022 making it easier to seek discharge.

How Bankruptcy Still Helps

Even if your student loans are not discharged, bankruptcy can help by:

  • Eliminating other debts, freeing up money for student loan payments
  • Stopping collections and lawsuits through the automatic stay
  • Providing leverage to negotiate better repayment terms
  • In Chapter 13, student loans can be treated as unsecured debt with lower priority

Frequently Asked Questions

Should I try to discharge my student loans?

If you are disabled, elderly, or have very limited earning potential, it may be worth pursuing. Consult a bankruptcy attorney who handles adversary proceedings.

Are income-driven repayment plans better?

For federal loans, income-driven plans (IBR, PAYE, SAVE) may reduce payments to $0 with eventual forgiveness. These should be explored before or alongside bankruptcy. Learn more.

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