Can You Discharge Student Loans in Chapter 7 Bankruptcy?

Massachusetts Bankruptcy & Student Loans

Sometimes, yes. The advice most borrowers still hear was written before November 2022, when the Justice Department changed how the government handles these cases. Here is what applies now, including two Massachusetts issues that national articles get wrong.

What changed is how the government responds to these cases. In November 2022, the U.S. Department of Justice and the Department of Education adopted a standardized process built around a borrower attestation form, directing government attorneys to stipulate to undue hardship and recommend discharge when three conditions are met: the borrower cannot presently afford to repay, that inability is likely to persist, and the borrower made good-faith efforts in the past. The form was revised in May 2025.

The legal standard did not get easier. The government’s handling of it did.

01Can student loans really be discharged in bankruptcy?

Yes. Student loans can be discharged in Chapter 7, but only through a separate court determination that repayment would impose an undue hardship. They do not fall away with the general discharge the way most unsecured debt does.

The mechanical difference is this. When a Massachusetts filer completes a routine Chapter 7 case, the discharge order sweeps in credit card balances, medical bills, personal loans, most collection accounts and deficiency balances. Student loans sit outside that sweep by operation of §523(a)(8) unless the borrower asks the court to decide the question and wins.

Not automatically dischargeable is a different thing from not dischargeable. The first describes a procedural hurdle. The second describes a prohibition, and no such prohibition exists in the statute. Congress wrote an exception with a built-in escape hatch called undue hardship.

02Why almost everyone believes the answer is no

The reputation was earned. For roughly two decades, borrowers seeking a student loan discharge faced a lawsuit against a well-resourced government defendant that contested every element, demanded discovery, and often took the case to trial. Litigation costs frequently exceeded what the borrower could pay, and the odds looked bad enough that many bankruptcy attorneys told clients not to bother.

Courts applying the majority test described it as requiring circumstances amounting to a “certainty of hopelessness,” a phrase the First Circuit Bankruptcy Appellate Panel later criticized as testing too much. Borrowers heard the shorthand, repeated it, and it hardened into a rule that was never in the statute.

That history explains the reputation. It does not describe how every case runs under the current Justice Department procedure.

03What changed in November 2022?

On November 17, 2022, the Justice Department issued guidance to its attorneys, developed with the Department of Education, directing them to stipulate to the facts showing undue hardship and recommend discharge when three conditions are satisfied.

1. The borrower presently lacks the ability to repay

Income is measured against necessary living expenses using standardized allowances drawn from IRS Collection Financial Standards. A borrower whose reasonable expenses consume income has nothing available for a meaningful student loan payment.

2. That inability is likely to persist

The forward-looking question. Relevant circumstances include age at or near retirement, disability or chronic medical limitation, extended unemployment or underemployment, never completing the degree the debt paid for, a decades-long repayment history that never moved the balance, and conditions that cap future earning capacity.

3. The borrower acted in good faith

Past conduct toward the loans. Payment history, contact with servicers, attempts to enroll in repayment programs, and whether the borrower engaged with the system rather than ignoring it.

The process applies only to loans held by the Department of Education, meaning Direct Loans plus FFEL Program and Perkins loans the Department holds. Loans held by a guaranty agency or a private lender are outside the process entirely.

04What changed again in May 2025?

The Justice Department issued a revised version of the attestation form in May 2025. The three-part framework from 2022 remained in place.

The practical takeaway for a borrower is narrow. The current version is the one to use, and an attorney handling these cases should be working from it rather than a 2022 or 2023 PDF still circulating online. The Guidance, the attestation form and a sample scenario are published on the Justice Department’s Civil Division documents and forms page.

05What is the student loan attestation?

The attestation is a long financial declaration, signed under penalty of perjury, that a borrower completes so the government can evaluate whether it should agree that repayment would impose an undue hardship.

It asks about:

• household size and dependents
• all sources of income
• necessary monthly expenses, measured against standardized allowances
• employment and work history
• the student loan history, including what was borrowed and when
• repayment efforts, plan enrollments and communications with servicers
• education outcomes, including whether the degree was completed
• health, age, disability and anything else affecting future earning capacity

Filing the attestation does not discharge anything. It is evidence. The government uses it to decide what position to take in the adversary proceeding, and the court decides the case.

06Which undue hardship test applies in Massachusetts?

Massachusetts sits in the First Circuit, which has never adopted the Brunner test that governs in most of the country. That matters, though less than some articles suggest.

In Nash v. Connecticut Student Loan Foundation, 446 F.3d 188, 191 (1st Cir. 2006), the court described the debtor’s burden under §523(a)(8) as a formidable task and declined to choose a test. The First Circuit Bankruptcy Appellate Panel then approved the totality-of-the-circumstances analysis in Bronsdon v. Educational Credit Management Corp. (In re Bronsdon), 435 B.R. 791 (B.A.P. 1st Cir. 2010), which weighs a debtor’s past, present and reasonably reliable future financial resources, reasonable necessary living expenses, and any other relevant facts.

Massachusetts bankruptcy judges have followed that approach. In a 2023 decision, Judge Christopher J. Panos observed that while the First Circuit has not decided which test governs, the Bankruptcy Appellate Panel has approved the totality test, as have most of the bankruptcy judges in this District to have addressed the issue, citing decisions from Judges Bailey, Feeney, Hillman, Boroff, Rosenthal and Katz.

Two qualifications keep this in proportion.

First, the difference between the tests is narrower than it sounds. The BAP’s objection to Brunner was that it requires extra proof of unique or extraordinary circumstances, and that it puts the good-faith burden on the debtor when the party opposing discharge should have to raise bad faith. On the core requirement, the tests converge. The First Circuit said in Nash that under any test a debtor must show the current inability to maintain a minimal standard of living will continue into the future, and its BAP has said the same about both tests by name.

Second, the Justice Department attestation tracks the three Brunner elements regardless of circuit. For a borrower with Department-held loans going through the standard process, the practical screening looks similar whether the case is filed in Boston or Dallas.

07The biggest obstacle in this circuit: an affordable income-driven payment

If you are enrolled in or eligible for an income-driven repayment plan with a low or zero monthly payment, courts in this circuit have treated that as weighing heavily against undue hardship. This is the single most important thing a Massachusetts borrower should understand before filing.

Two decisions show how far this reaches. In Parvizi, 641 B.R. 729 (B.A.P. 1st Cir. 2022), a debtor owed more than $650,000 in student loans and still lost, because an estimated $80 monthly payment under an income-driven plan was affordable on the debtor’s budget. In a 2023 District of Massachusetts case, a debtor owing over $200,000 lost for the same reason: her income-based payment was zero or nominal, and the court found the household was living frugally but not below a minimal standard of living.

Availability of such a plan is a factor rather than an automatic defeat, and courts have said it is not dispositive. But a borrower whose required payment is currently zero faces a real problem proving that repayment imposes a hardship, and no amount of loan balance by itself solves it.

The borrowers who overcome this generally have something the repayment plan does not fix: an inability to meet basic expenses even with a zero payment, a medical or age-related limit on future earning capacity, or a documented reason the plan will not remain available or affordable.

What the 2026 repayment changes mean here

Federal repayment options changed substantially on July 1, 2026, under the One Big Beautiful Bill Act and a March 2026 court order ending the SAVE plan. The Repayment Assistance Plan and a new Tiered Standard Plan became available, and borrowers formerly on SAVE received servicer notices directing them to select a different plan.

This affects the analysis in both directions. Good faith often turns partly on whether a borrower engaged with available programs, and the menu has just been rewritten. Affordability depends on what the payment actually is, which for many people is now a different number than a year ago. Massachusetts borrowers can get free help with the repayment side through the Attorney General’s Student Loan Assistance Unit, which handles servicer disputes and default resolution but not bankruptcy proceedings.

08Does my spouse’s income count if only I file?

Yes. The First Circuit Bankruptcy Appellate Panel held in Lorenz, 337 B.R. 423, 432 (B.A.P. 1st Cir. 2006), that §523(a)(8) requires bankruptcy courts to consider a non-filing spouse’s income when deciding whether excepting a Chapter 7 debtor’s student loans from discharge would impose an undue hardship.

This surprises people. A borrower can file individually, keep the spouse out of the bankruptcy entirely, and still have the household’s full financial picture examined in the student loan proceeding. Courts look at whether household income meets household needs, not at the filing spouse’s paycheck in isolation.

Practically, a married borrower with a working spouse should expect the household budget to be the battleground.

09Do you still have to file an adversary proceeding, and who decides?

Yes, and the bankruptcy judge decides. Filing Chapter 7 does not put the student loan question in front of the court, and it does not trigger the Justice Department review.

1. The borrower files the Chapter 7 case.
2. The borrower files a separate adversary complaint seeking a determination under §523(a)(8).
3. The complaint and summons are served on the required parties, which for Department-held loans includes multiple government addresses.
4. The government attorney provides the attestation and the borrower’s loan history.
5. The borrower completes and returns the attestation with supporting documentation.
6. The Justice Department and Department of Education review and take a position.
7. The bankruptcy court enters a judgment or order resolving dischargeability.

An adversary proceeding is a lawsuit filed inside the bankruptcy case, with its own case number, docket and procedural rules under the Federal Rules of Bankruptcy Procedure 7000 series and the local rules of the U.S. Bankruptcy Court for the District of Massachusetts. Some districts, including the Central District of California and the Western District of Washington, publish standing orders or practitioner guidelines specific to these proceedings. Massachusetts has not published guidelines of that kind, so the standard adversary rules apply.

The Justice Department’s guidance is explicit that its stipulation and recommendation do not bind the court. The government’s position still carries weight: if the review supports discharge, government attorneys can stipulate to the facts, recommend discharge, and support a full or partial discharge. A case where the largest creditor agrees with the borrower looks very different from one where that creditor contests everything.

10How much has the process actually changed?

The Justice Department published data in a July 17, 2024 announcement covering the first year and a half:

• 1,220 cases filed from November 2022 through March 2024, including 588 in the six months from October 2023 onward, a 36 percent increase over the prior six months.
• Among cases decided by courts in that period, 98 percent produced debt relief through a full or partial discharge.
• 96 percent of borrowers in filed cases voluntarily used the streamlined attestation process.

Three cautions. Those figures describe cases that were filed and decided, so they reflect outcomes among borrowers whose cases were worth bringing, not the odds for anyone who wants a discharge. The July 2024 release remains the most recent published Justice Department data, now more than two years old. And the guidance is executive branch policy rather than statute, which means it can be revised by a future administration in a way the statute cannot.

11Who tends to have a stronger case?

No single factor decides anything. Certain fact patterns draw more serious examination under the persistence element.

Older borrowers

A borrower at or past ordinary retirement age has a different future-income picture than a healthy 35-year-old with a rising career. Remaining working years are a finite number, and the analysis accounts for that.

Borrowers living primarily on Social Security or fixed income

Fixed retirement income is not expected to grow, which bears directly on persistence.

Borrowers with disabilities or chronic medical limitations

A condition limiting the ability to work, or the hours available for work, affects both present ability and future capacity. It qualifies no one automatically, and a separate federal disability discharge exists outside bankruptcy.

Borrowers who never finished the degree

Carrying the debt without the credential means bearing the cost without the earnings the education was supposed to produce.

Borrowers in repayment for many years

A long history bears on both persistence and good faith, particularly where years of payments left the balance flat or higher through capitalized interest.

Borrowers with unavoidable household expenses

Dependents, ongoing medical costs and similar obligations reduce what is genuinely available for repayment.

12Three things that do not disqualify you

Having a job

Employment does not disqualify a borrower. The analysis asks whether the borrower can maintain a reasonable standard of living while making meaningful payments, and whether that situation is likely to continue. Someone working full time at wages that cover rent, food, transportation and medical costs with nothing left can still present an undue hardship case. Strong income with strong prospects makes the case harder, which is a different statement.

Having any money at all

The question is ability to repay while maintaining a reasonable standard of living, not whether a borrower has reached zero. Nobody should impoverish themselves to strengthen a case. Beyond being bad advice, manufacturing hardship before filing creates its own problems in a bankruptcy case, where every recent transaction is disclosed and examined.

Owing less than $100,000

Section 523(a)(8) sets no dollar threshold. A borrower with $18,000 has the same legal right to seek a determination as one with $180,000. Economics is separate from eligibility: an adversary proceeding takes attorney time, and that cost has to be weighed against what the borrower stands to gain.

13Can only part of the loans be discharged?

Sometimes. The Justice Department guidance contemplates supporting a partial discharge where the facts point that way, and courts have entered judgments discharging part of a balance.

There is an important limit. Federal appellate courts have held that a bankruptcy court may grant a partial discharge only if §523(a)(8)’s undue hardship requirement is satisfied as to the portion being discharged. A partial discharge is not a compromise the court can split down the middle. The debtor still has to prove that excepting that specific portion from discharge would impose an undue hardship.

14What happens to private student loans?

Private loans are not eligible for the Justice Department process. They also raise a threshold question federal loans do not: whether the debt falls within §523(a)(8) at all.

The statute protects three categories: an educational benefit overpayment or loan made, insured or guaranteed by a governmental unit, or made under a program funded in whole or part by a governmental unit or nonprofit institution; an obligation to repay funds received as an educational benefit, scholarship or stipend; and any other educational loan that is a qualified education loan under 26 U.S.C. §221(d)(1), meaning debt incurred solely to pay qualified higher education expenses.

Debt outside all three categories is treated like other general unsecured debt. The Second, Fifth and Tenth Circuits have read the educational benefit category narrowly rather than as a catch-all, in Homaidan (2021), Crocker (2019) and McDaniel (2020). The First Circuit has not decided the question, so a Massachusetts case argues from persuasive authority rather than binding circuit law.

15Can you file after your Chapter 7 is closed?

Generally yes. Federal Rule of Bankruptcy Procedure 4007(b) allows a dischargeability complaint other than one under §523(c) to be filed at any time. Student loan complaints fall in that category and are not subject to the 60-day deadline that governs fraud claims. The 1983 Advisory Committee Note confirms subdivision (b) sets no time limit for §523(a)(8) debts.

Court fees are not the obstacle. The Bankruptcy Court Miscellaneous Fee Schedule provides that the reopening fee must not be charged to permit a party to file a Rule 4007(b) complaint, and separately that the adversary complaint fee must not be charged when the debtor is the plaintiff. Attorney fees are the real cost of the proceeding.

Two wrinkles matter. Loans refinanced or consolidated after the original case closed may be treated as a new obligation, which limits what an old case can reach. And whether a request must come through a reopened case or a new filing has not been uniformly resolved. The absence of a deadline is not a reason to wait, and a borrower should get advice on timing rather than assume delay is free.

16What happens if you lose?

The loan survives the bankruptcy with interest continuing to accrue, and the borrower returns to a collection system with powers most creditors do not have, including administrative offset and administrative wage garnishment on defaulted federal loans.

One piece of good news sits alongside that. Under §523(b), a determination that a student loan is not dischargeable is not final for all time. The First Circuit noted in Nash that its decision did not bar a later, better-supported request. A borrower whose circumstances materially worsen may be able to raise the question again.

Still, a loss costs money and time. That is why screening a case honestly before filing matters more here than in almost any other part of a consumer bankruptcy.

17How taxes differ between a discharge and forgiveness

A bankruptcy discharge and administrative forgiveness are taxed differently, and as of 2026 the gap widened.

A discharge in a bankruptcy case is excluded from gross income under 26 U.S.C. §108(a)(1)(A), which excludes discharge of indebtedness income when the discharge occurs in a title 11 case. That exclusion has no expiration date.

Administrative forgiveness is different. The American Rescue Plan Act temporarily excluded most student loan discharges from federal income, and that provision sunset on December 31, 2025 without being extended. For forgiveness occurring in 2026 or later, income-driven repayment and Repayment Assistance Plan forgiveness is again generally treated as taxable cancellation of debt income at the federal level. Public service loan forgiveness and death and disability discharge remain excluded under separate rules.

One caution against overreading this. Borrowers sometimes argue that a future tax bill at the end of a repayment plan is itself an undue hardship. Massachusetts courts have generally rejected that argument as too speculative, and have pointed out that the separate insolvency exclusion under §108(a)(1)(B) often eliminates the tax anyway for a borrower with few assets. The tax difference is real, but it is not a shortcut to a discharge.

18Is Chapter 7 worth filing only for student loans?

Often not, and this deserves an honest answer rather than a sales pitch.

Start with a threshold point the rest of this article assumes: Chapter 7 has its own eligibility requirement. The means test compares income against Massachusetts median figures and applies an expense analysis, and a borrower with substantial income may not qualify for Chapter 7 at all. That question comes before any student loan analysis.

A borrower whose only significant debt is federal student loans should first understand what exists outside bankruptcy. Income-driven repayment, Public Service Loan Forgiveness, total and permanent disability discharge, borrower defense to repayment and closed school discharge all operate through the Department of Education without a bankruptcy filing, and some may resolve the problem without a court case.

The calculation looks different for someone who also carries substantial credit card balances, medical debt, personal loans or collection judgments. There, Chapter 7 does independent work regardless of how the student loan question turns out, and the adversary proceeding becomes an additional piece of a filing that made sense on its own.

19Does an adversary proceeding mean trial, and what if the government disagrees?

Not necessarily, and disagreement does not end the case.

Part of the purpose of the 2022 guidance is to identify cases the government can resolve on stipulated facts rather than litigate. A case can still involve requests for documentation, discovery, motion practice, an evidentiary hearing or a trial. That is more likely where the government does not agree, where loans are held by a guaranty agency or private lender, or where the financial picture is contested.

If the government opposes, the bankruptcy judge still decides, and a borrower can proceed. The economics shift considerably: more attorney time, a real possibility of trial, and a different risk profile. Screening at the outset is what keeps a borrower from discovering that halfway through.

20Illustrative scenarios

These are hypothetical people, not clients, and not case results. They show how the elements interact rather than predicting outcomes.

21Signs a case may be worth evaluating

No item below guarantees a discharge, and no combination of them does either. An attorney review may be worthwhile if several describe your situation:

• Your federal student loan balance is substantial relative to your income.
• Payments are unaffordable even after honest budgeting, including under available income-driven plans.
• You are at or approaching retirement age.
• Your income is unlikely to increase meaningfully.
• A disability or chronic condition limits your ability to work.
• You borrowed many years ago and the balance has not moved.
• You have tried to deal with the loans rather than ignoring them.
• You did not receive the degree or the earnings the loans were meant to produce.
• Necessary household expenses, counting your spouse’s income and the household’s needs, leave little available.
• You also have significant other debt that makes Chapter 7 worth considering on its own.

Frequently asked questions