The idea that student loans can never be discharged in bankruptcy has circulated long enough that most people accept it as fact. It isn’t. The accurate version is more nuanced: discharge is difficult, but it’s legally possible under the right circumstances. At The Law Offices Of Mayer & Newton, our attorneys Richard Mayer and John Newton have handled more than 50,000 bankruptcy cases, including time served as bankruptcy trustees, and we’ve seen firsthand how this misconception causes people to abandon options they haven’t fully explored.
Federal law sets the bar deliberately high. But high isn’t the same as impossible, and understanding exactly what the law requires is the starting point for anyone carrying student debt who is considering bankruptcy in Tennessee.
Can Student Loans Be Discharged in Bankruptcy?
Under 11 U.S.C. Section 523(a)(8), student loans are treated differently from most consumer debts. Credit card balances and medical bills discharge automatically when a bankruptcy case resolves. Student loans don’t. A debtor must separately prove undue hardship to obtain a discharge, and that proof must clear a specific legal standard. This applies to both federal and private student loans.
The process itself trips people up. Discharging student loans isn’t accomplished by anything on the initial bankruptcy petition. It requires filing a separate lawsuit within the bankruptcy case called an adversary proceeding. This is a distinct legal action with its own complaint, service requirements, and hearing. Missing this step means student loan debt survives the bankruptcy entirely, regardless of how the rest of the case resolves.
The Brunner Test: What Tennessee Courts Actually Apply
Tennessee bankruptcy courts sit within the Sixth Circuit Court of Appeals, which adopted the Brunner test as the standard for evaluating undue hardship in In re Oyler, 397 F.3d 382 (6th Cir. 2005). This is the controlling case. When a Knoxville filer pursues student loan discharge, the Brunner test is what the court applies.
The test has three prongs, and all three must be satisfied. Falling short on even one defeats the claim.
The three elements a debtor must establish:
- Inability to maintain a minimal standard of living: Based on current income and expenses, repaying the loans would prevent the debtor from maintaining even a minimal standard of living for themselves and any dependents.
- Persistent hardship: The financial circumstances that make repayment impossible are likely to continue for a significant portion of the repayment period, not just a temporary rough patch.
- Good faith repayment effort: The debtor has made genuine efforts to repay the loans before seeking discharge. Courts assess this by looking at payment history, enrollment in income-driven repayment programs, and whether the debtor explored alternatives.
The good faith prong often gets underestimated. Courts look closely at whether a borrower applied for income-driven repayment plans, sought deferment, or otherwise engaged with available options before concluding repayment was impossible. A documented record of those efforts matters significantly.
How Chapter 7 & Chapter 13 Affect the Discharge Process
Neither Chapter 7 nor Chapter 13 automatically resolves student loan debt. Under both filing types, a borrower who wants a discharge must bring a separate adversary proceeding. The base bankruptcy case and the adversary proceeding run on parallel tracks.
Chapter 7 Considerations
Chapter 7 eliminates most unsecured debt quickly, typically within a few months of filing. If the adversary proceeding succeeds, student loans discharge along with other debts. If it doesn’t, the borrower exits bankruptcy without student loan relief. Because Chapter 7 doesn’t involve a repayment plan, there’s no interim management of student loan payments during the case.
Chapter 13 Considerations
Chapter 13 involves a three-to-five-year repayment plan that reorganizes debts. During that period, a borrower can treat student loans as a lower-priority debt compared to mortgage arrears or car payments, which can provide some cash-flow relief. But completing the Chapter 13 plan doesn’t discharge student loans. A separate undue hardship finding through an adversary proceeding is still required. Some borrowers pursue the adversary proceeding partway through the Chapter 13 plan; others wait until the plan concludes. In either chapter, adversary proceedings for Knoxville-area filers are heard through the U.S. Bankruptcy Court for the Eastern District of Tennessee, Knoxville Division.
What the 2022 Federal Guidance Actually Changed
In November 2022, the U.S. Department of Justice and the U.S. Department of Education issued joint guidance directing government attorneys to apply a more consistent process when evaluating undue hardship claims on federal student loans. The guidance introduced a standardized attestation form for documenting income, expenses, disability status, and future financial prospects, and directed government attorneys to assess whether contesting a discharge claim serves the interest of the United States before defaulting to litigation. That can mean fewer contested proceedings on federal loan cases where the financial picture is clear.
What the guidance didn’t do is change the legal standard. Tennessee courts still apply the Brunner test, and the Sixth Circuit’s interpretation of undue hardship under In re Oyler still controls what happens in a Knoxville courtroom. Coverage suggesting the discharge standard itself was relaxed is giving an incomplete picture.
What to Expect from the Adversary Proceeding
An adversary proceeding begins with filing a complaint against the loan holder. For federal loans, the complaint is filed against the U.S. Department of Education. The complaint sets out the facts supporting each Brunner prong. From there, the case proceeds through a scheduling order, often includes discovery, and may be resolved by motion or proceed to a hearing.
The evidence that matters most includes current income documentation, a realistic monthly budget, any medical records or employment history relevant to future earning capacity, and a history of repayment efforts including applications for income-driven plans. Building this record before filing the adversary proceeding, rather than gathering it under deadline, produces a more coherent and persuasive presentation. Courts have granted discharge in cases involving long-term disability, permanently diminished earning capacity, and documented histories of engaging with federal repayment programs without achieving sustainable payment levels.
Is a Discharge Realistic for Your Situation?
Proving undue hardship under the Brunner test is demanding, and there’s no honest way to frame it otherwise. But demanding isn’t the same as unachievable. The answer in any individual case depends on specific facts: income, expenses, loan balances, employment trajectory, and the history of repayment efforts. Those facts vary widely, and they determine whether a viable case exists.
If you’re carrying student debt that feels impossible to manage, the right starting point is finding out whether your circumstances could actually satisfy the Brunner standard. The Law Offices Of Mayer & Newton offers free consultations. Reach us online or call (865) 328-7993 to have that conversation.