Finishing a Chapter 13 plan does not, by itself, wipe out federal student loans. But if you are in Chapter 13 now, you can ask the bankruptcy court to decide whether your Department of Education loans should be discharged for undue hardship, and you do not have to wait until your plan ends to start.
What Chapter 13 does on its own
A Chapter 13 plan generally runs three to five years, depending largely on how your income compares to the state median. Filing the case stops most collection activity through the automatic stay.
When you complete your plan payments, the court grants a discharge. The Bankruptcy Code, however, carves student loans out of that discharge. Section 1328(a)(2) excludes debts of the kind described in section 523(a)(8), which covers federal student loans. The “hardship discharge” for people who cannot finish their plan does not help either, because it does not reach debts that cannot be discharged in Chapter 7.
So for most people, simply finishing the plan leaves the student loans in place.
The way to ask: an adversary proceeding
Section 523(a)(8) lets the court discharge student loans if repaying them would impose an “undue hardship” on you and your dependents. To get that decision, you file an adversary proceeding, which is a separate lawsuit inside your bankruptcy case.
Under Federal Rule of Bankruptcy Procedure 4007(b), a complaint of this kind may be filed at any time. That means you do not need to wait for your plan to finish. When the loans are held by the Department of Education, the U.S. Attorney’s office for the district where your case is pending handles the government’s side. Since November 2022, the Justice Department has used a standardized process, built around a sworn attestation form, to decide whether to agree to a discharge.
Where your Chapter 13 paperwork comes in
The attestation asks about your household, income and expenses, and compares your expenses to the IRS Collection Financial Standards. It also asks whether you filed a means test form in your bankruptcy case, and names Form 122C-2, the Calculation of Disposable Income, along with the Chapter 7 version.
That matters because you have already given the court detailed numbers in your Chapter 13 filings. If your income or expenses have changed since then, for example because you lost overtime, took on care for a parent, or had a new medical cost, the attestation is the place to show the current picture and explain the difference. Numbers that conflict without explanation tend to raise questions.
Timing depends on your case
Because the Chapter 13 discharge itself comes at the end of the plan, how a student loan ruling fits with your plan’s timeline is something to work through for your specific case. How far along you are, whether your income is likely to change, and how your loans are being treated in the plan can all affect when it makes sense to file. There is no single right answer.
Working with your Chapter 13 attorney
Our office does not file new Chapter 13 cases. If you are already in Chapter 13, though, we can handle the student loan adversary proceeding in your existing case, working alongside the attorney who filed it. You do not need to change bankruptcy attorneys. We handle federal loans held by the Department of Education; private student loans are outside this process.
The honest limits
Filing an adversary proceeding does not guarantee any result. The government may agree to a full discharge, a partial discharge, or none at all, and the bankruptcy judge makes the final decision. Every case turns on its own facts.
Talk to us
If you are in a Chapter 13 case and carrying federal student loans, your first consultation is free, by phone or video. Call the Law Office of Brian D. Shapiro at 702-386-8600.