Debts dischargeable under certain circumstances

Student Loans

Student loans are nondischargeable regardless of whether the lender is a private or a public institution. The new law states that any other “qualified educational loan” is nondischargeable. It means that practically any debt incurred to pay for higher education qualifies as a nondischargeable student loan.

One way to get around this is to file a Complaint to Determine Dischargeability of Student Loan. Required is that you can show that otherwise you would have an undue hardship.

Income Taxes

There is a common misconception that income taxes are never discharegeable in bankruptcy. This is not true.

Income Taxes are dischargeable under the following circumstances.

  1. You have filed a tax return for the year in question
  2. You did not receive a formal notice of assessment of federal taxes from the IRS within 240 days before you filed for bankruptcy.
  3. The tax return you filed for the particular debt has been filed two years or more before you file for bankruptcy
  4. The tax return for the debt was due at least three years before you filed for bankruptcy

Be careful that the IRS has not already levied a line against your personal or real property. Once the IRS has a lien this lien will remain on the property after the bankruptcy discharge. It is advisable to consult a bankruptcy attorney to find out the legal consequences of owed income taxes and to avoid that bankruptcy will miss its goal.


To be successful in a court action to discharge student loans typically requires a bankruptcy lawyer. The courts in the ninth circuit to which California belongs apply a wider test to determine dischargeability.

Some of the factors are:

  1. The debtor has dependents for which he has to care.
  2. The debtors child or dependent has a serious disability which prevents the debtor from seeking employment or from advancing to obtain a more gainful employment.
  3. The debtor has poor education
  4. The debtor is underemployed
  5. The debtor lacks skills to find gainful employment
  6. The debtor is unable to relocate because of his/her age
  7. The debtor has insufficient assets to pay for the debt

Before you ask the court to discharge your student loan it is of advantage to ask the student loan lender for a deferment or forbearance. There are many court cases that deal with discharge of student loans and most debtors lose their case. It makes sense to consult a bankruptcy attorney to make sure you are arguing the proper facts.