It’s challenging to get federal and private student loans erased in bankruptcy. But if you’re overwhelmed with your student loans and other debt, you may be able to get some relief through Chapter 13 bankruptcy.
Unlike Chapter 7 bankruptcy, which involves liquidating assets to pay off debts, Chapter 13 allows you to restructure your debts with a new, more manageable payment plan. After three to five years on the plan, many outstanding debts are typically canceled. However, because of the way Chapter 13 bankruptcy works, this may or may not include student loans.
Even if your student loans don’t get wiped out, Chapter 13 reorganization could lower your monthly payments for several years and, by eliminating other debt, make it easier to repay them in the future. But because it has a major impact on your credit, Chapter 13 should only be used as a last resort.
Here’s a closer look at what happens to student loans in Chapter 13 bankruptcy and how it can impact your student loan situation.
Table of Contents
Key Points
• Discharging federal and private student loans through bankruptcy is generally considered a last resort because bankruptcy remains on a borrower’s credit report for years.
• Chapter 13 bankruptcy restructures a debt into a payment plan that borrowers pay off over three to five years, while Chapter 7 liquidates borrowers’ assets to pay creditors.
• Discharging student loans in Chapter 13 requires an “adversary proceeding” to prove “undue hardship” to the court.
• Chapter 13 may reduce student loan payments and halt collections, but interest continues to accrue on the loans, typically increasing what’s owed.
• Federal student loans are generally more challenging to discharge through bankruptcy compared to private student loans
Understanding Chapter 13 Bankruptcy
Chapter 13 is a type of bankruptcy that restructures your debt. It’s known as a “wage earner’s plan” because it enables borrowers who earn a steady income to develop a plan to repay all or part of their debts.
When you apply for Chapter 13 bankruptcy, you’ll make a list of all your debts, as well as provide information on your income and regular expenses. With the help of a bankruptcy trustee appointed by the court, you’ll come up with a plan for repaying your creditors on a three- or five-year plan. The plan will allocate your disposable income toward your debts on a “pro rata” basis, or proportionally based on what you owe to each creditor. Disposable income is the income left over after you’ve paid all of your essential expenses. Once you’ve completed the bankruptcy payment plan, the court will discharge the remaining balances of qualifying debts.
Student debt isn’t automatically considered a qualifying debt, though. To get your student loans discharged through Chapter 13 bankruptcy, you need to take an additional step of filing what’s called an “adversary proceeding.” As part of this filing, you must prove to the court that paying back your student loans would be an “undue hardship” for you and your family. While this used to be a highly complicated process, a policy change put into place by the Biden administration in 2022 simplified and streamlined the paperwork involved. Student loan borrowers can now fill out a 15-page form that details their financial struggles and makes their case for student loan discharge.
Eligibility Requirements for Chapter 13
To file for Chapter 13 bankruptcy, you must meet the following requirements:
• You have a regular income. You must have enough disposable income to make some payments on your debts. If your income is higher than the local median income, you’ll repay your debt over three years. If it’s below the median, you’ll repay your debt over five years.
• Your debt is under the limit. Your combined debts must total less than $2.75 million.
• You’re up-to-date on income tax filing. You’ll need to submit proof that you filed your federal and state income tax returns for the four tax years before your bankruptcy filing date.
• You’ve received credit counseling. You must have received credit counseling from an approved agency within 180 days before filing for bankruptcy.
Meeting these requirements sets the stage for entering into Chapter 13 bankruptcy and working toward debt reorganization. To get your student loans canceled through bankruptcy, however, there are additional requirements. A bankruptcy court typically must find that:
• You cannot presently maintain a minimal standard of living if you are required to repay the student loan.
• Your financial situation is likely to persist into the future for a significant portion of the loan repayment period.
• You have made good faith efforts in the past to repay the student loan.
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How Chapter 13 Differs From Chapter 7 Bankruptcy
One of the main differences between Chapter 13 and Chapter 7 bankruptcy is the way they deal with debt. With Chapter 7 bankruptcy, an individual’s non-exempt assets are liquidated to repay the debt. In Chapter 13 bankruptcy, the debt is reorganized and repaid under a court-approved plan over a period of three to five years.
While Chapter 7 discharges debt quickly — typically, within months — it has drawbacks. If you own property such as a home or car, they could be repossessed. Additionally, there’s the factor of how long bankruptcy stays on credit reports. A Chapter 7 bankruptcy remains on your credit report for 10 years.
If you file for Chapter 13 bankruptcy, you can typically keep property such as a home or car by paying what you owe through your repayment plan. Chapter 13 bankruptcy stays on your credit report for seven years.
Because of the serious impact both types of bankruptcy can have on your credit, filing for Chapter 13 or Chapter 7 bankruptcy is generally considered as a last resort.
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How Does a Chapter 13 Bankruptcy Affect Student Loan Payments?
When it comes to Chapter 13 bankruptcy and student loans, your payments can be affected in the following ways:
• It can reduce your monthly payments. Chapter 13 bankruptcy will base your debt payments on your disposable income. You’ll make payments to your appointed trustee, who will distribute these payments among your various creditors. Depending on the terms of the plan, your student loan payments may go down substantially.
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• It prohibits student loan collection. During Chapter 13 bankruptcy, an automatic stay will go into effect which prohibits credit collectors or loan servicers from harassing you and trying to collect the debt for up to five years.
• You may be able to get your loans discharged. Filing for Chapter 13 bankruptcy does not in itself guarantee that your student loans will be discharged. But it does allow you to file an adversary proceeding. If you’re able to prove that repaying your student loans would cause extreme hardship, you may be able to get your loans canceled at the end of your repayment plan.
Treatment of Federal vs. Private Student Loans
Federal loans tend to be more difficult to discharge through bankruptcy than private student loans are to discharge in bankruptcy.
Although borrowers need to prove undue hardship to be eligible for bankruptcy with either type of loan, federal student loans come with more borrower protections than private student loans do. For example, federal loan borrowers may be able to take advantage of income-driven repayment plans that base monthly payments on a borrower’s discretionary income and family size, or opt for deferment or forbearance, which temporarily pause or reduce monthly student loan payments.
Private loans don’t have these benefits, so it may be easier for a private student loan borrower to prove that undue hardship exists as a result.
In addition, private lenders may be more willing to negotiate a settlement or loan discharge than the federal government, which has the ability to seize a borrower’s wages and tax refunds in order to collect on defaulted loans.
Impact on Interest Accrual During the Repayment Plan
During a Chapter 13 repayment plan, the interest continues to accrue on student loans. This means that a borrower may have a substantially higher amount to pay when bankruptcy ends. At that point, they will need to resume full payments for what they still owe on their student loans, plus the accrued interest.
What Takes Place When Your Chapter 13 Case Comes to an End?
A Chapter 13 bankruptcy can eventually discharge some of your debts. But unless you were able to prove to the court that repaying your student loans would be a serious hardship, your federal or private student debt won’t just completely go away.
Remaining Balance and Repayment Obligations
After the bankruptcy plan comes to an end, your lender or loan servicer will set you up on a new payment schedule with a recalculated monthly payment.
If you’ve been able to get rid of your other debts or increase your income over the years you’ve been in Chapter 13, you may be in a better position to afford your student loan payments. You can also explore various options for student loan relief or forgiveness.
An income-driven repayment (IDR) plan, as mentioned previously, bases your monthly student loan payment amount on your income and family size. And under one of the IDR plans — the Income-Based Repayment (IBR) plan — any remaining loan balance is forgiven on your federal student loans at the end of the repayment period.
Also, thanks to a new rule that went into effect in July 2025, borrowers in the IBR plan can receive credit toward forgiveness for each month of payments under a Chapter 13 plan. This is the case even if the borrower enrolls in the IBR plan during or immediately after the bankruptcy case is closed.
Will You Be Able to Apply for Student Loans in the Future?
Chapter 13 bankruptcy may affect your ability to secure student loans going forward, especially private loans. Here’s what you need to know.
Impact of Bankruptcy on Federal Loan Eligibility
Reorganizing your student loans through Chapter 13 bankruptcy should not disqualify you from taking out additional federal student loans in the future. However, you may not qualify for federal student loans or other types of aid if you have any loans in default.
If you’re in default, you can turn to student loan consolidation or rehabilitation to get your loans out of default and back into good standing.
Credit Considerations When Applying for Private Loans
Qualifying for a private student loan or student loan refinancing after bankruptcy might be more difficult. Private lenders base their approval decisions on your creditworthiness. Lenders may view applicants with a bankruptcy history as high-risk, leading to higher interest rates or denial of loan applications. Chapter 13 bankruptcy can stay on your credit report for seven years.
You may be able to qualify for a private student loan or student loan refinancing by applying with a creditworthy cosigner, however.
The Takeaway
Filing for bankruptcy doesn’t necessarily mean that your student loans will be discharged. However, Chapter 13 bankruptcy can give you a new repayment plan for all of your debts, including your student loans, for three or five years. This reorganization might give you some much-needed breathing room if you’re overwhelmed with debt and calls from debt collectors. After this time period, many of your debts (and possibly your student loans) will be canceled.
If Chapter 13 bankruptcy does not result in student loan discharge, however, you’ll have to pay them back after your plan comes to an end. Interest that accrued during the repayment period will also be added to the loan balance, increasing the total amount owed. And keep in mind that filing for Chapter 13 can have a negative impact on your credit that can linger for seven years.
Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.
FAQ
Can Chapter 13 bankruptcy help with student loan payments?
Chapter 13 bankruptcy could reduce your student loan payments for three to five years. The automatic stay issued when you file for Chapter 13 also halts all collection activities, including those for student loans, which can prevent default and other aggressive collection actions during the repayment period.
Filing for Chapter 13 bankruptcy also allows you to file an adversary proceeding. If you’re able to prove that repaying your student loans will result in undue hardship, you may be able to get the loans canceled, along with your other debts, at the end of the repayment period.
Will Chapter 13 bankruptcy eliminate my student loan debt?
Not necessarily. Filing for Chapter 13 bankruptcy can get certain debts discharged after you complete a three- or five-year payment plan. In order to get student loans discharged, however, you need to file a separate action, known as an “adversary proceeding,” requesting the bankruptcy court find that repayment would impose undue hardship on you and your dependents.
What happens to student loan collections during bankruptcy?
If you file for bankruptcy, all collection activities, including those for student loans, will automatically be paused until the case is over or a judge says that payments should restart.
Can student loans be discharged in Chapter 13 under undue hardship?
It’s possible. If you are able to prove through an adversary proceeding that repaying your loans would result in undue hardship, you may be able to get your loans discharged.
Will filing Chapter 13 affect my ability to go back to school or get financial aid?
Unless you have student loans that are in delinquency or default, filing Chapter 13 should not affect your ability to go back to school or impact your eligibility for financial aid. If your loans are in default, however, you will likely need to resolve the situation and work to set up a repayment plan to become eligible for financial aid.
Photo credit: iStock/Maksym Belchenko
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