The 30-Second Answer
Student loan debt can be discharged in bankruptcy — but it requires proving “undue hardship” through an adversary proceeding, a separate lawsuit within your bankruptcy case, and courts have historically set that bar very high. However, 2022 guidance from the U.S. Department of Justice and Department of Education significantly expanded how courts evaluate undue hardship, and more Illinois borrowers are successfully discharging student loans in 2024-2026 than at any point in the past 30 years. Partial discharge — eliminating some but not all of the debt — is also available. If you have federal student loans and are drowning, the legal landscape has shifted more in your favor than most attorneys will tell you.
The Story
Christine Park had $187,000 in federal student loan debt from a graduate program in social work at a Chicago-area university. She graduated in 2014 earning $38,000 per year at a nonprofit. By 2024, she was earning $52,000 — a decade of work later. Her income-driven repayment plan kept her payments at $0 because her income was still low relative to her debt. But interest had capitalized for years. She owed more than when she graduated.
Christine had heard bankruptcy could not touch student loans. She was mostly right — but not entirely. Her attorney filed a Chapter 7 petition and simultaneously filed an adversary proceeding seeking discharge of her student loans under the Brunner test. Under the 2022 DOJ guidance, the government attorneys evaluated her circumstances: ten years of below-median income, a disability that limited her career advancement, and no realistic prospect of ever repaying the principal. The DOJ did not contest the discharge. The court granted it.
Christine left the courtroom with $187,000 of debt gone. The law that everyone said could not help her — helped her.
What Is the Brunner Test?
The Brunner test, established in Brunner v. New York State Higher Education Services Corp. (1987) and applied by the Seventh Circuit (which covers Illinois), requires the debtor to prove three elements by a preponderance of the evidence: (1) the debtor cannot maintain, based on current income and expenses, a minimal standard of living for themselves and their dependents if forced to repay the loans; (2) additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period; and (3) the debtor has made good-faith efforts to repay the loans.
Historically, courts applied the Brunner test extremely harshly — requiring near-total certainty of permanent incapacity. The 2022 DOJ/DOE guidance changed this. Federal attorneys now evaluate cases using a holistic analysis that considers income, expenses, dependents, health, age, and loan balance. They no longer require borrowers to have no reasonable prospect of ever earning more money — only that their current and reasonably foreseeable circumstances make full repayment genuinely impossible while maintaining a minimal standard of living.
How Does the Adversary Proceeding Work?
Student loan discharge requires filing an adversary proceeding — a separate civil lawsuit within the bankruptcy case. You (the plaintiff) sue the loan holder or servicer (the defendant). The proceeding follows civil litigation procedures: complaint, answer, discovery, and either a settlement or a hearing before the bankruptcy judge. Most adversary proceedings for student loan discharge are filed in the Northern District of Illinois Bankruptcy Court in Chicago.
Under the 2022 guidance, when the Department of Education is the defendant (for federal Direct Loans), its attorneys now conduct an early case assessment and, in appropriate cases, stipulate to discharge or partial discharge without contested litigation. This has dramatically reduced the cost and duration of adversary proceedings for many Illinois borrowers. Private student loans — not held by the federal government — do not benefit from this guidance and require full adversary litigation.
Alternatives to Discharge: Income-Driven Repayment and PSLF
For borrowers who do not meet the Brunner test, income-driven repayment (IDR) plans — SAVE, PAYE, IBR, and ICR — cap monthly payments at a percentage of discretionary income and forgive remaining balances after 20 to 25 years of qualifying payments. Public Service Loan Forgiveness (PSLF) forgives remaining balances after 10 years of qualifying payments by employees of government agencies or 501(c)(3) nonprofits — like Christine’s Chicago-area nonprofit. Atlas Law Center advises clients on whether bankruptcy discharge, IDR forgiveness, or PSLF is the most strategically appropriate path for their specific loan type, employment, and financial situation.
The Toolkit
| Option | What It Requires | Best For |
|---|---|---|
| Bankruptcy Discharge (Brunner) | Adversary proceeding; proof of undue hardship under 3-part test | Borrowers with permanent or long-term disability, very low income relative to debt, and good-faith repayment history |
| Partial Discharge | Same adversary proceeding; court may discharge portion of balance | Borrowers who cannot repay full balance but may be able to service a reduced amount |
| Income-Driven Repayment (SAVE/IBR) | Enroll through servicer; 20-25 year repayment period | Borrowers with stable income who cannot discharge but want manageable payments and eventual forgiveness |
| Public Service Loan Forgiveness | 10 years of qualifying payments at government or 501(c)(3) employer | Teachers, social workers, government employees, nonprofit staff in Illinois |
| Private Loan Adversary Proceeding | Full adversary litigation against private lender; same Brunner standard | Borrowers with private loans who meet undue hardship criteria |
The Algorithmic Shadow
Federal student loan servicing in 2026 is almost entirely automated, and the algorithmic failures have been catastrophic for Illinois borrowers. Servicers have systematically miscounted qualifying PSLF payments, placed borrowers in forbearance instead of IDR plans (generating interest capitalization instead of forgiveness progress), and failed to process income recertifications correctly — all through automated systems that generated errors at scale. The resulting harm to Illinois borrowers runs into billions of dollars in interest capitalized on balances that should have been actively decreasing.
Ahmad Sulaiman advises Illinois student loan borrowers to document every interaction with their servicer, request an account history showing payment counts and qualifying payment designations, and challenge servicing errors through the complaint process at the CFPB and Federal Student Aid Ombudsman. An adversary proceeding for student loan discharge is also an opportunity to put the servicer’s records under scrutiny — and servicing errors that harmed the borrower’s ability to maintain good faith repayment are relevant to the Brunner analysis. Atlas Law Center integrates servicing error documentation into every student loan discharge case it handles.
Frequently Asked Questions
Are private student loans treated differently than federal loans in Illinois bankruptcy?
Yes. Federal student loans benefit from the 2022 DOJ/DOE guidance that makes early evaluation and settlement more accessible. Private student loans — from banks, credit unions, or private lenders — require full adversary litigation with no parallel guidance from the lender’s side. However, some courts have found that private loans used for non-qualified educational expenses (not tuition at an eligible institution) may not qualify as “education loans” under the bankruptcy code at all — making them dischargeable as ordinary unsecured debt without meeting the Brunner test.
What does “minimal standard of living” mean under the Brunner test?
Courts have interpreted this as something above bare subsistence but well below comfortable middle-class living. The inquiry is whether the debtor, after paying ordinary living expenses — rent, food, utilities, transportation, medical costs, and basic dependent care — has any funds remaining to make meaningful loan payments. Courts look at actual expenses against income, and the 2022 guidance directs DOE attorneys to evaluate these expenses realistically rather than applying an artificially austere standard.
Do I have to file bankruptcy to get student loan relief in Illinois?
No. Income-driven repayment plans, PSLF, and targeted forgiveness programs — including borrower defense to repayment for borrowers defrauded by their schools — do not require bankruptcy. Bankruptcy is one of several available tools, and for many Illinois borrowers, IDR or PSLF is the more appropriate path. The decision depends on loan type, employment, income trajectory, and specific financial circumstances. Atlas Law Center evaluates all available options before recommending any particular strategy.
Can I include student loans in Chapter 13 bankruptcy even if I cannot discharge them?
Yes. In Chapter 13, student loans are treated as general unsecured debt and included in the repayment plan. Payments made through the plan count as payments toward IDR forgiveness timelines. Chapter 13 also provides the automatic stay, halting collection on student loans during the plan period — which can provide critical breathing room for borrowers facing default or wage garnishment on private student loans.
What is the statute of limitations on student loan collection in Illinois?
Federal student loans have no statute of limitations — the government can collect indefinitely through wage garnishment, Social Security offset, and tax refund seizure without ever obtaining a court judgment. Private student loans are subject to Illinois’s five-year statute of limitations (735 ILCS 5/13-206) for written contracts. A private lender who waits more than five years from default to sue may be time-barred.
How do I find an attorney who handles student loan bankruptcy in Illinois?
Look for attorneys who specifically identify student loan adversary proceedings as a practice area — not just general bankruptcy attorneys. The adversary proceeding process, the Brunner test analysis, and the DOE settlement evaluation process all require specific expertise that general consumer bankruptcy practitioners may not have. Atlas Law Center handles student loan discharge cases and can advise on whether your circumstances meet the evolving standards courts and the DOE are applying in 2024-2026.
Ahmad Sulaiman and Atlas Law Center represent Illinois borrowers who are ready to fight for student loan relief — whether through bankruptcy discharge, IDR optimization, PSLF compliance, or servicer error remediation. The law has changed. The path that was blocked for thirty years is opening. Call us and find out whether it is open for you.
Contact Atlas Law Center for a free consultation — Employment Law: (630) 394-6350 | Consumer Law: (331) 321-4748. Care first. Justice always.