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Is Student Loan Debt Dischargeable in a Texas Bankruptcy?

June 1st, 2020 at 7:51 pm

TX bankruptcy attorney, Texas student loan debt attorney Student loan debt is something that is becoming an issue in the United States. According to the latest statistics from Forbes, there are currently an estimated 45 million borrows who collectively owe about $1.56 trillion in debt for student loans. Of those, around 11 percent are delinquent on their loans, which means they are 90 days or more late on a payment. For many borrowers, student loan payments are expensive and they are struggling to make ends meet. Many have inquired as to whether or not student loan debt is dischargeable in bankruptcy, but the answer is not quite as simple as a “yes” or “no.”

Is it Even Possible?

Many people believe that student loans are ineligible to be included in a bankruptcy and they would be correct — but only in most situations. It is not impossible to discharge your student loan debt in a bankruptcy case, but it will make your bankruptcy more difficult because you will have to file an adversary proceeding to determine whether or not you are eligible to have your student loans discharged.

Determining “Undue Hardship”

During the adversary proceeding, the court will determine whether or not you have demonstrated that paying your student loans has caused you “undue hardship.” The difficulty with this determination is that it was never actually defined and was therefore left up to individual courts and judges to determine. The most commonly used test to determine eligibility for student loan discharge is called the Brunner Test and consists of proving three simple points:

  • You cannot maintain a minimal standard of living in addition to supporting your dependents if you continue to pay the debt
  • Your financial distress is likely to exist for a majority of the repayment period of the loan
  • You have made good faith efforts to repay the loan thus far

Contact a San Antonio, TX Bankruptcy Attorney

If you are having difficulties making your monthly student loan payments because you also have other types of debt, such as credit card or auto loan debt, you still may have options. At the Law Offices of Chance M. McGhee, we can help you determine whether or not you should pursue bankruptcy and include your student loans in your discharge, or if your best option would be to take another route. Our skilled New Braunfels, TX bankruptcy lawyer can help you through the bankruptcy process from beginning to end. Call our office today at 210-342-3400 to schedule a free consultation.



The Surprising Benefits: Stop Student Loan Collection

July 2nd, 2018 at 7:00 am

Chapter 7 “straight bankruptcy” stops student loan collection actions for a few months. Sometimes it can stop these actions permanently. 


Bankruptcy gives you tools to deal with special debts—including those you can’t easily write off. Last week we got into income taxes. Today we discuss student loans, focusing on this special kind of debt in Chapter 7 “straight bankruptcy.” Next week, we’ll cover student loans under Chapter 13 “adjustment of debts.”

Let’s assume you owe a student loan that you can’t afford to pay. Here’s how Chapter 7 can help.

Student Loan Collection

Student loan creditors and collectors have extraordinary collection powers. Often they don’t need to sue you first and get a legal judgment against you, as most creditors must. These creditors and their collections have very aggressive collection procedures available to them. Besides the usual garnishment of bank accounts and paychecks, these special creditors can often grab your tax refund or a portion of a Social Security benefit check.

The “Automatic Stay” from a Chapter 7 Filing 

Student loans are special in a number of ways. However, just like ordinary debts, student loan collections are immediately stopped by the “automatic stay” imposed by your bankruptcy filing. It doesn’t matter whether or not the student loan would be discharged (written off) in your Chapter 7 case.

The “automatic stay” stops “any act to collect, assess, or recover a claim against the debtor.”  (Section 362(a)(6) of the U.S. Bankruptcy Code.) (A “claim” is a “right to payment”—essentially, a debt. See Section 101(5).) More specifically, the “automatic stay” stops “the commencement or continuation…  of a[n]..  .   administrative…  proceeding against the debtor. (Section 362(a)(1).) “Administrative proceedings” include the non-judicial collection actions mentioned above that don’t include a lawsuit. The Chapter 7 filing also specifically stops “the setoff of any debt” owed to you, such as a tax refund or Social Security setoff. (Section 362(a)(7).)  So, filing bankruptcy stops all student loan collection actions.

This break from collections lasts throughout the 3-4 months that most consumer Chapter 7 cases take to finish. But unless you deal with the student loan appropriately in the meantime, after that its collection can continue.

Dischargeability of Student Loans

Bankruptcy permanently discharges some student loans. A dischargeable student loan must meet just one condition, albeit a tough and confusing condition. The student loan must cause you an “undue hardship.” As the Bankruptcy Code puts it, you can’t discharge a student loan unless that loan “would impose an undue hardship on the debtor and the debtor’s dependents.” (Section 523(a)(8).)

What does “undue hardship” mean? How much harder must it be than just a simple “hardship”?

You may feel like your student loans are causing you a great financial hardship. However, the federal courts have interpreted this phrase very narrowly.  The details are beyond the scope of today’s blog post, but just keep in mind this condition is challenging to meet.

During the Chapter 7 Break in Collections      

During the 3-4 months of your Chapter 7 case you want to take steps to make the temporary break in collections a permanent one. Here are three ways to accomplish this.

  • If you and your bankruptcy lawyer believe you meet the “undue hardship” condition, your bankruptcy lawyer would file an “adversary proceeding” during your Chapter 7 case. That’s a specialized lawsuit designed to determine whether you qualify for “undue hardship.” If you persuade the bankruptcy judge that you do, the student loan debt would be permanently discharged. Then the temporary break in collections would become permanent. There would be no more collection on a debt once you no longer legally owe it.
  • The bankruptcy judge may give you only a partial discharge of your student loan(s). In this situation the judge is determining that repaying all of the loan(s) would cause you an “undue hardship.” But paying back only a portion would not. So you’d make arrangements to pay the remaining student loan debt, probably at a reduced monthly payment. As long as you made the payments your student loan creditor would take no further collection action against you.
  • If you don’t qualify for a full or partial “undue hardship” discharge, your Chapter 7 case would still at least discharge all or most of your other debts. That should leave you better able to pay the remaining student loans. Hopefully you’d be in a position to make payment arrangements. This may be done through a payment-reduction program which are available for various student loans. If so, then your situation would hopefully be resolved by the end of your Chapter 7 case. Then, at the time that the automatic stay would expire you won’t be facing any more student loan collections.

Avoiding Default and Preserving Options

Even if you don’t qualify for “undue hardship,” the bankruptcy pause in collections can be extremely helpful. It could maybe even be critical. That’s because you can only qualify for most student loan workout programs before you are too far behind on payments. So filing a Chapter 7 case before you’ve fallen too far behind could allow you to take advantage of these programs. But if you waited too long you could lose out, and be seriously disadvantaged.


It’s really crucial to talk with an experienced bankruptcy lawyer about all this. Student loans are complicated and often very challenging to deal with. This is true both outside and inside bankruptcy. You need a lawyer on your side who deeply understands both bankruptcy law and student loans.


Writing off a Student Loan

March 15th, 2017 at 7:00 am

To legally write off —discharge—a student loan in bankruptcy takes an extra step: proving that it is causing you “undue hardship.”

Adversary Proceedings and the Discharge of Debts

Our last several blog posts have been about adversary proceedings—lawsuits in bankruptcy court. In rare circumstances you might be on the receiving end of an adversary proceeding. Or you may use the advantages of bankruptcy court to file your own adversary proceeding against a creditor.

Last Friday’s blog post was about some of the reasons you’d consider suing a creditor during your bankruptcy case. The first reason was to discharge—legally write off—a debt that would otherwise not be discharged. Student loans fall in this category.

Most debts are discharged in bankruptcy without you having to take any special action against them during your case. This includes virtually all medical debts, credit cards, and the vast majority of other personal and business debts. Some other debts are never discharged—child and spousal support and criminal fines, for example. And finally, other debts may be discharged but only under certain circumstances. These include income taxes and student loans.

But income taxes and student loans are very different in the types of conditions that determine dischargeability. Income taxes generally are or are not discharged based on a set of readily determined facts. The main facts are whether and how long ago the pertinent tax return was legally due to be submitted, and how long ago that return actually was submitted to the tax authority. Usually, if you file the tax return and wait long enough, the tax will be discharged in bankruptcy.

The Vague Condition of “Undue Hardship”

In contrast, to discharge a student loan the condition that you must meet is maddeningly vague. The Bankruptcy Code simply says that a student loan is not discharged unless requiring you to pay it “would impose an undue hardship on [you or your] dependents.” See Section 523(a)(8). So the burden is on you to show “undue hardship.” Otherwise you’d remain liable on the student loan. The court order that discharges your other debts would not apply to it.

That means that to discharge a student loan you and your bankruptcy lawyer must file an adversary proceeding against your student loan creditor(s) and convincingly demonstrate to the bankruptcy judge that paying the debt would cause you “undue hardship.”

What Does “Undue Hardship” Mean?

You may think that showing “undue hardship” should not be hard if you can’t afford to pay the student loan. But it’s harder to show undue hardship than you’d think. Likely much harder.

For many years bankruptcy judges and federal appeals courts have been trying to figure out what those two words mean.

First, what determines whether or not a student loan debt creates a hardship?  

And second, what more beyond ordinary “hardship” is needed to create an “undue hardship”? Much has been made of the fact that Congress didn’t just say “hardship” but rather an “undue” level of hardship. That’s clearly a tougher condition to meet. But what does that odd word, “undue” mean? How can those two vague words be turned into a practical legal standard?

The Three Practical Requirements

Over time, judges have generally come to agree that to show “undue hardship” you have to meet three requirements.

  • First, you must currently be unable to maintain even a minimal standard of living for yourself and any dependents if you had to make the required payments on the student loan.
  • Second, this situation must be expected to continue over all or most of the student loan’s repayment period.
  • Third, you must have earlier acted responsibly by making a real effort to pay on the student loan, and/or to try to qualify for any available forbearances, debt consolidations, and administrative payment-reduction programs.

To establish “undue hardship,” you have to meet all three of these conditions. Otherwise, making you keep paying the student loan(s) may be indeed cause you a hardship. But your hardship would not rise to the level of a legally established “undue hardship”!


As “undue hardship” has come to be legally defined, it can be a challenging condition to prove. As a result filing bankruptcy doesn’t necessarily give you an easy way to get out of student loans. However, people do qualify under the right circumstances. And it does seem like more and more people filing bankruptcy have student loans as a major part of their problem. Student loans have gotten larger and more burdensome. And frankly more student loan debtors are getting older, closer to disability, illness, and retirement.  For a variety of reasons more people are qualifying for “undue hardship.”


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