In a test case, Lucy Knight, 20, and her brother Christopher, 19, say there is no reason why their education funding should suffer just because of their parents' bankruptcy.
Their lawyers are attacking as 'irrational and perverse' government regulations which require Lynda Knight, 47, and her 49-year-old husband Denis to make contributions they simply cannot afford to the cost of their children's higher education.
The family's counsel, Richard Egleton, told Mr Justice Dyson: 'Certainly there is nothing to stop a bankrupt going to university, why not the son of a bankrupt?'
Although Mrs Knight has a well-paid job as a barrister's clerk, the couple have pledged to pay all their surplus income to their trustee in bankruptcy so that their creditors will be paid.
But in August last year the council said the couple would have to make a parental contribution of£1,325 to the cost of Lucy's degree course in mechanical engineering at Southampton University.
The council later assessed the same parental contribution in respect of Christopher who began his seven-year architecture course at Portsmouth University in September last year.
That meant the couple had to pay£300 towards their son's upkeep and£1,025 towards his tuition fees.
The couple complained to the department of education and employment but were informed in October last year that the payments they make to their trustee in bankruptcy would not be taken into account when assessing their parental contributions.
Mr Egleton argued that interpretation of the 1998 Education (Mandatory Awards) Regulations amounted to breach of Lucy and Christopher's right of 'access to education' enshrined in the European Convention on Human Rights.
After a brief hearing, Mr Justice Dyson said he was 'naturally sympathetic' to Lucy and Christopher's plight.
Adjourning the case for 21 days, the judge said it raised difficult and important issues on which the DfEE should be allowed to respond.
He told Mr Egleton: 'I would like to hear what the secretary of state has to say to all this. I think this is a very difficult argument, but I don't want to shut you out.'
Mrs Knight said later her son and daughter are living at home to keep their costs to a minimum, but she still fears they may not be able to complete their higher education because of financial pressures.
'We feed them, but we can't given them any money,' she added. 'This case raises an important point of principle. If this is not sorted out, all children of parents who are able to continue working after being declared bankrupt will be at risk of being denied a higher education.'