Student loans can be discharged in bankruptcy in Illinois, but only if you prove “undue hardship.” That’s a harder standard than for most debts, but recent Department of Justice changes have made it more realistic than it’s been in decades. A Chapter 7 attorney who Chicago residents work with can now pursue discharge through a streamlined attestation process that didn’t exist before November 2022.
The old rule that “student loans can never be discharged in bankruptcy” was always a myth. Discharge has always been legally possible. Government attorneys now have clearer guidance about when to agree to discharge instead of fighting, and that’s shifted real outcomes.
The General Rule
Under 11 U.S.C. § 523(a)(8), student loans are “presumptively nondischargeable.” When you file for bankruptcy, student loans survive by default. To eliminate them, you file a separate lawsuit inside your bankruptcy case (an “adversary proceeding”) and prove undue hardship.
The statute applies to:
- Federal student loans (Direct, FFEL, Perkins)
- Loans made under programs funded by a government unit or a nonprofit
- “Qualified education loans” from private lenders meeting certain criteria
Not every private loan falls under Section 523(a)(8). Loans exceeding the cost of attendance, or loans to non-students, may be treated as ordinary unsecured debt and dischargeable without proving undue hardship. This is fact-specific.
The Brunner Test in Illinois
The undue hardship standard isn’t defined in the Code. Courts developed it through case law. The most common framework is the Brunner test, which the Seventh Circuit (covering Illinois) follows. Under Brunner, you have to prove:
- Present inability to maintain a minimal standard of living if forced to repay
- Additional circumstances indicate that the hardship will persist for a significant portion of the repayment period
- Good faith efforts to repay the loans
For years, Seventh Circuit courts applied these prongs strictly. Many debtors never tried because the bar seemed impossible. That’s changed.
The 2022 DOJ Guidance Changed the Math
In November 2022, the Department of Justice issued guidance that fundamentally changed how DOJ attorneys handle student loan discharge. The U.S. Trustee Program’s student loan guidance page hosts the memoranda, the attestation form, and sample scenarios.
Under the new framework, a debtor completes a standardized attestation form describing their financial situation. The DOJ reviews it using clear criteria tied to IRS expense standards and loan servicer records. If the criteria are met, the DOJ recommends discharge rather than fighting the adversary proceeding. The form tracks the Brunner prongs but applies them more mechanically:
How the DOJ measures present inability to pay
Compared to IRS National and Local Standards, is the debtor’s income insufficient to cover basic living costs while paying the loans?
How the DOJ measures future inability to pay
Is the debtor over 65, disabled, unemployed for five of the last ten years, or facing circumstances likely to persist?
How the DOJ measures a good-faith effort
Did the debtor take reasonable steps given their situation? Did they pursue income-driven repayment, request deferments, or contact the servicer? Making zero payments isn’t automatically disqualifying if there’s a documented reason.
The guidance applies to federal student loans held by the Department of Education. Loans owned by guaranty agencies or private lenders aren’t automatically covered, though the framework is often persuasive. Early outcomes shifted meaningfully: a large share of completed attestation reviews have resulted in DOJ recommending full or partial discharge, a dramatic change from the pre-2022 landscape.
The Adversary Proceeding Process
Student loan discharge requires an adversary proceeding. In a typical Chicago area case:
- Main bankruptcy case filed (Chapter 7 or Chapter 13)
- Complaint filed as a separate adversary proceeding within the bankruptcy case
- For federal loans, the attestation form is submitted to the Assistant U.S. Attorney
- DOJ reviews, verifies with servicers, and determines its position
- If DOJ agrees, parties file a joint stipulation recommending discharge
- If not, the case proceeds to litigation (you still have the right to prove undue hardship at trial)
- Bankruptcy judge reviews and decides
For private loans not covered by the DOJ process, the adversary follows the same track, but the lender is the opposing party. Outcomes depend heavily on specific facts and the judge.
Federal vs. Private Loans
The distinction matters a lot.
Federal loans held by the Department of Education
Covered by the 2022 DOJ attestation framework. Clear process, standardized evaluation.
Federal loans held by guaranty agencies (some FFEL, Perkins)
Not automatically covered by the new framework. Consolidation into a Direct Consolidation Loan before filing can sometimes bring these loans into the covered category.
Private student loans
Not covered by the DOJ process. Each lender takes its own position. Private loans that weren’t “qualified education loans” under the Bankruptcy Code may be dischargeable without proving undue hardship at all.
Should You File Bankruptcy Primarily for Student Loans?
Not automatically. Bankruptcy is a big decision with effects that last for years. If your only significant debt is student loans and your other finances are stable, better options may exist: income-driven repayment, Public Service Loan Forgiveness, or federal forgiveness programs.
Bankruptcy often makes more sense when student loans are part of a broader financial picture. If you’re also dealing with credit card debt, medical debt, or a lawsuit, Chapter 7 bankruptcy in Chicago addresses all of it at once. The full breakdown of what types of debts can be discharged through bankruptcy shows which categories survive and which don’t. The Illinois Chapter 7 means test is the first check for whether Chapter 7 is even available.
The Bigger Picture for Illinois Borrowers
Student loan delinquencies surged in 2025 after the pandemic-era payment pause ended and servicers resumed reporting missed payments. Federal Reserve data showed elevated delinquency levels throughout the year.
That translates to many Illinois borrowers making hard choices. Some are rolling balances onto credit cards, creating a worse problem. Others are letting loans default. Bankruptcy isn’t the only answer, but it deserves serious consideration.
What Happens During a Chapter 7 Case?
Even if you’re not trying to discharge student loans, filing still affects them temporarily. The automatic stay freezes collection during the case. Once the case closes, collection on non-discharged loans resumes.
If you’re current on income-driven repayment, the case generally doesn’t disrupt that.
Frequently Asked Questions
Can I discharge private student loans in Illinois bankruptcy?
Sometimes. “Qualified education loans” under the Code require undue hardship. Private loans that don’t meet that definition may be fully dischargeable as ordinary unsecured debt.
Do I have to stop making student loan payments before filing for bankruptcy?
No. Continuing to make payments when you can helps show good faith under the third Brunner prong. Don’t stop paying without talking to an attorney first.
Can I discharge student loans in a Chicago Chapter 13 case?
Yes, through the same adversary proceeding framework. Chapter 13 doesn’t automatically discharge student loans, but you can file an adversary proceeding during the case.
Does income-driven repayment help my student loan discharge case?
Yes. Enrolling in IDR is one of the clearest indicators of good faith. IDR payments over time can also establish a sustained inability to pay.
Will the 2022 DOJ student loan guidance change under future administrations?
Possibly. The guidance was issued in November 2022 and updated in 2023 and 2025. Future administrations can modify or withdraw it. Timing is a conversation to have with counsel based on your specific situation.
Getting Advice Specific to Your Loans
Student loan discharge cases are fact-specific. The mix of federal and private loans, income history, effort to manage the loans, overall financial picture, whether Chapter 7 or Chapter 13 makes more sense.
If you’re in the Chicago area and student loans are part of your financial problem, schedule an appointment with Tang & Associates or call (773) 944-4000. A Chicago bankruptcy attorney familiar with the 2022 DOJ framework can tell you whether your case is a candidate for the attestation process.
Disclaimer: This blog is for informational purposes only and does not constitute legal advice. Consult an attorney for legal guidance specific to your situation.