When Can Student Loans Be Discharged in Chapter 7 Bankruptcy?

 Posted on March 26, 2025 in Chapter 7 Bankruptcy

Education is often a key to success in today’s world, not to mention a worthy goal on its own. Education – and particularly higher education – can be expensive, however. With the cost of the average college tuition at private universities at just over $40,000, education will, for most people, require taking on significant debt.

When unexpected events in life make that debt unmanageable, some may consider filing for bankruptcy. They may wonder whether it is possible to discharge student loans in bankruptcy. An experienced Texas Chapter 7 bankruptcy attorney can provide advice on whether bankruptcy is the right option to discharge student loan debt. 

What Happens to Student Loan Debt in Chapter 7 Bankruptcy?

In a Chapter 7 bankruptcy, also called "liquidation" bankruptcy, most of your credit card or medical debt can be discharged. Student loans are treated differently in Chapter 7, however, Although it is possible to discharge student debts, you will usually have to show that paying back that debt would cause you significant hardship. 

How Do Texas Courts Determine Whether Student Debt is Dischargeable in Chapter 7?

Bankruptcy law provides that student loan debt can be discharged in bankruptcy if paying back the loan would cause "undue hardship." Most Texas courts will use the Brunner Test (named after the legal case that first set this standard) to make the decision whether you would suffer undue hardship under the law. In practice, to meet this test you must be in dire financial circumstances with little chance that they will improve. If you meet this three-part test, the court will discharge your student loans, but you must show that: 

• If you have to pay back the loans, you will not be able to have a minimal standard of living. 

• Your financial situation is not likely to change any time soon and your financial problems are ongoing. 

• You can demonstrate that you have made a good faith effort to repay your student loans and have not attempted to get out of paying them.  

The Brunner Test is known to set a high bar for discharging student loan debts, making it difficult to discharge student loans under Chapter 7. 

Although most courts use the Brunner Test to determine if student loan debt is dischargeable in Chapter 7, a few courts will use the more lenient Totality of the Circumstances Test. In that case, the court will look at your big-picture ability to pay back the loan, including your past, present and future finances, your living expenses, and other relevant factors affecting your ability to repay the loan, such as lack of employment opportunities.

Call an Austin County, TX Chapter 7 Bankruptcy Attorney

If you are looking for solutions to deal with significant student debt, the experienced Houston, TX bankruptcy attorney at The Fealy Law Firm, PC can go over your options to discharge this debt. Attorney Vicky Fealy helps good people through hard times, including those times when the debt you took on to improve your life via education becomes unmanageable. Call the office at 713-526-5220 for a complimentary consultation.