If a disability or chronic injury limits how much you can earn, that fact can carry real weight when you ask the bankruptcy court to discharge your federal student loans. Under the Department of Justice's guidance, it is one of the reasons to presume your financial struggles will continue, and you do not need a doctor's letter to raise it.
Why disability matters
Federal student loans can be discharged in bankruptcy only if repaying them would impose an "undue hardship" on you and your dependents. That is the standard in the Bankruptcy Code, 11 U.S.C. § 523(a)(8). In November 2022, the Department of Justice issued guidance telling its attorneys how to evaluate these cases. The government asks whether you can pay now while keeping a minimal standard of living, whether that is likely to last, and whether you have tried in good faith to repay. A disability can touch all three, but it matters most to the second.
A presumption that your situation will last
The guidance tells government attorneys to presume your inability to pay will persist in certain situations. One is when "the debtor has a disability or chronic injury impacting their income potential." Others include being 65 or older, being unemployed for at least five of the last ten years, not finishing the degree the loans paid for, and loans that have been in repayment status (other than "in-school") for at least ten years.
You may send information from a treating physician, and if you do, it is supposed to be considered carefully. But you are not required to. The guidance says the presumption "may be applied even in the absence of a formal medical opinion." A presumption is a starting point, not a guaranteed result.
What the attestation form asks
The attestation form posted by the Department of Justice has a box to check: "I have a disability or chronic injury impacting my income potential." You then describe the disability or injury and how it affects your ability to work, and say whether you receive any government benefits because of it.
Specific, honest detail helps more than general statements. Say a former warehouse worker hurt her back and can now work only part-time at a desk job. She would explain the injury, her work restrictions, how her hours and pay changed, and any benefits she receives.
The form also asks whether your uninsured, out-of-pocket medical costs exceed the listed amounts for any household member. The guidance recognizes that spending above the standard amounts can include specific health-related costs, so keep records of what you actually pay.
What about the Department of Education's disability discharge?
The Department of Education has a separate program called Total and Permanent Disability (TPD) discharge. It is for borrowers whose disability severely limits their ability to work now and in the future, documented through the VA, the Social Security Administration, or a licensed medical professional. It does not involve going to court. Our office does not prepare TPD applications, but if you may qualify, it is worth looking into on studentaid.gov.
If you don't qualify for TPD, bankruptcy may still be an option. The DOJ guidance says the existence of TPD relief "generally should not foreclose" you from showing a future inability to pay. It also says a past TPD denial "does not otherwise suggest that the debtor's income is sufficient to service student loan debt."
Good faith still counts
A disability does not replace the good-faith question. The attestation form asks about payments and other efforts you made to repay, and whether you enrolled in an income-driven repayment plan. Under the guidance, not enrolling "alone does not show a lack of good faith," and government attorneys are told to accept any reasonable explanation. If your health made it hard to keep up with paperwork, that may be part of your explanation.
The limits
Every case turns on its own facts: your income, household, expenses and the effect of your condition on your work. The government may support a full discharge, a partial discharge, or neither, and the bankruptcy judge makes the final decision. This process applies to federal loans held by the U.S. Department of Education; we do not handle private student loans.
If you live with a disability and carry federal student loans, call us at 702-386-8600 for a free consultation by phone or video. We will review your loans and situation and tell you honestly whether a case makes sense.