How to Demonstrate Undue Difficulty for Student Loans

Paying back your student loans can be a daunting task, especially if you also have other consumer debt to contend with. However, it is possible (though difficult) to discharge student loans in bankruptcy. To do so, you must demonstrate undue hardship. Typically, you must demonstrate that repaying your loans is causing you financial hardship that will last indefinitely and that you made a good-faith effort to repay your loans before declaring bankruptcy. If you are successful, the bankruptcy court will discharge your loans entirely or partially.

Part 1: Establishing Financial Difficulties

1. Make a basic household budget. While you are not required to live on the budget you create, you can use it to demonstrate that even if you eliminated all discretionary spending, you would still be unable to repay your student loans. Your bare-bones budget should be one that you can live on with a low-income.

The poverty line for a single-person household in 2019 is $12,490. If you are married and have two children, your household income could reach $25,750. Visit for more information and up-to-date figures on the poverty guidelines.

Examine the smallest and most affordable housing options in your area. If you live with your spouse and have no children, you might consider renting a studio or one-bedroom apartment rather than something larger. Make a basic meal plan with easy-to-cook ingredients that you can prepare at home. Spending money on eating out or buying junk food should be avoided.

Typically, you’ll also need to cut back on other forms of entertainment, such as cable or streaming video subscriptions. If you have more than one car, you will most likely need to plan a budget based on only one car or rely entirely on public transportation.

2. Gather information on your dependents. If you have children or other dependents, include their ages, whether they have disabilities or special needs, the cost of their medical insurance, information about their education, and any other relevant information. All of this will be considered by the judge when determining whether repaying your student loans would cause you undue financial hardship.

For someone to be considered your dependent, you must be able to show that you pay at least half of their living expenses.

Your spouse or parent may also be considered dependent on you. This is more likely if you are caring for a disabled spouse or parent who is unable to work.

3. Justify the expenses that are preventing you from repaying your student loans. Depending on your lifestyle and situation, you may have expenses that do not fit into a basic budget. List your expenses and explain why they are necessary for your survival or the survival of your dependents to demonstrate undue hardship.

For example, if you are required to work from home, you may require wireless internet service at your residence. You would have to demonstrate to the judge that this internet service was used primarily for business purposes rather than for entertainment.

If you have children who attend special schools, demonstrate to the court that you have made an effort to obtain scholarships and other financial aid to help with tuition and other expenses.

4. Produce proof that you cannot earn significantly more money. Being voluntarily underemployed isn’t always a factor in a standard bankruptcy. However, if you want your student loans discharged as well, you must be prepared to demonstrate that you are earning the most money possible under the circumstances.

For example, if you work part-time, the judge may decide that you could repay your loans if you worked full-time and that there is nothing stopping you from doing so. In that case, the judge is unlikely to discharge your student loans.

If you’re approaching retirement age and nearing the end of your career, the judge is more likely to agree that you can’t make any more money than you are now.

Some judges may be persuaded that, while you could earn more money, the work you are doing is in the public interest. For example, if you work as a public school teacher, the judge may consider your job to be in the public interest even if you could make more money working at a private school.

Tip: Your location plays a role in this as well. If you live in a rural area with few opportunities, you have a much better chance of getting your student loans discharged than if you live in an urban area with plenty of options.

5. Display proof that you are a recipient of government benefits. If you receive Social Security disability benefits or other financial assistance, the judge is more likely to accept your financial hardship. You will, however, need to demonstrate that your situation is not temporary and is likely to continue for the foreseeable future.

If you are receiving Social Security disability benefits, you may be able to get your loan servicer to discharge your loans without going through bankruptcy court. To discuss this option, contact your loan servicer.

Part 2: Demonstrating the Endurance of Your Struggle

1. Gather financial documentation to demonstrate that your hardship will continue. It is insufficient to demonstrate that making student loan payments now would result in undue financial hardship. You must be able to demonstrate that your financial situation is unlikely to change for the duration of the loan. Tax returns demonstrating that your income has not changed significantly over the last ten years could be used to demonstrate this.

Information about your job and position can also assist the judge in determining the severity of your hardship. For example, if you’ve advanced as far as you possibly can in your career, it’s unlikely that you’ll ever make more money than you do now.

Remember that because student loans can be financed for 20 or 30 years, you must demonstrate that your financial situation is unlikely to improve within the next 10 to 15 years.

Age also plays a role here. If you are nearing retirement age, you are far more likely than a recent graduate to be successful in having your loans discharged.

Because bankruptcy is meant to be a fresh start, expect the judge to consider whether your financial situation will improve after your bankruptcy is completed.

2. Show proof of a disability or ongoing medical condition. The need for recurring medical treatment is frequently one of the most significant ongoing strains on a household budget. If you or a member of your family has a chronic medical condition or disability that necessitates ongoing treatment, evidence of this can help to demonstrate that your financial crisis is likely to last for the foreseeable future.

While it is not required to have a disability or a medical condition to demonstrate that your financial situation is stable and unlikely to change, it is typically difficult to demonstrate otherwise.

If you are completely and permanently disabled, you may be able to discharge your student loans without having to prove undue hardship to the bankruptcy court. To apply for a discharge, contact your loan servicer.

3. Demonstrate that you have attempted and failed to increase your income. You don’t have to be nearing the end of your career to have your student loans forgiven. You would, however, need proof that you had attempted and failed to obtain higher-paying jobs. Perhaps no jobs are available in your area, or employers will not hire you for a significant reason that is beyond your ability to change.

For example, you may live in a rural area where there are few job opportunities in your field. You, on the other hand, have applied for jobs in the nearest city. You could move to the city if you were offered a job, but you haven’t received one yet.

The judge will assess your efforts and determine whether you have done everything possible to obtain a higher-paying job and whether your circumstances are likely to change. Because this is a fairly subjective evaluation, the more documentation you have of your efforts, the better your chances of persuading the judge.

Part 3: Demonstrating a Good-Faith Effort to Repay

1. Discuss more affordable payment options with your loan servicer. In the short term, your loan servicer may be able to reduce or even eliminate your student loan payments. Even if you do not accept any of these arrangements, your attempt to repay your loan shows the court that you are acting in good faith by exploring all options.

Some repayment options, such as income-based repayment, may be unavailable for private loans.

Document your call if your loan servicer refuses to lower your payments or change the due date. Note the name of the person you spoke with, and then request that they send you a written letter confirming that the loan servicer is unwilling to work with you to make your payments more affordable.

If you earn very little money, income-based repayment on federal loans can reduce your payments to zero. If you are eligible for an income-based repayment plan but choose not to participate, you must be prepared to explain why.

2. Collect all correspondence you’ve had with your loan servicer. If you haven’t communicated with your loan servicer in any way, the judge may rule that you haven’t made a good-faith effort to repay your loans. Look for emails or letters confirming that you contacted your loan servicer about your loan or payment options.

Include any responses you’ve given to loan servicer notices. For example, if you received notification that your payment was 30 days overdue, you may have a letter explaining the reason and stating when you can make a payment.

3. Locate all receipts or bank statements for payments you’ve made. When documenting your payments, go as far back as you can. You can also use your loan servicer’s payment records to compile this information.

Make a note of any late payments and the length of time they were late. If you recall why the payment was late, write it down. Collect any evidence you have of the circumstances that led to the late payment.

Understandably, it can be difficult to recall why a payment was late several years ago. However, try to gather as much information as you can. This demonstrates that you took your student loans seriously and made a good-faith effort to repay them.

Tip: If your loan payments have been deferred and you have never made a single payment, a judge is unlikely to discharge your student loans.

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