What happens if there’s a judgment against you and then you file for bankruptcy? What would it do to the judgment?
Interviewer: Are there any obligations that cannot be discharged in the bankruptcy? How about tax liens or child support payments?
Some Income Taxes May Be Discharged but Alimony and Child Support Payments are Not Dischargeable
Tanya: Child support and alimony payments can’t be discharged. Some taxes that are owed, such as a portion of a person’s income taxes, can be discharged. It depends on what year they were incurred and what kind of taxes they are.
There are certain taxes, which are called trust fund taxes, not income taxes, so for an example when you’re an employer and you collect taxes from employees or sales tax from other people that you’re just really holding money for the government and you owe that to the government. You cannot discharge those taxes.
Your regular income taxes, if it’s over three years ago and they were properly filed and they’re assessing you for that money, those can be discharged if they meet the proper qualifications.
Student Loans are Not Dischargeable in a Bankruptcy Filing
Interviewer: What about student loans?
Tanya: Okay so student loans are not dischargeable. They are considered unsecured priority debts. There is a group called the National Association of Consumer Bankruptcy Attorneys that I’m a member of. Actually today, President Obama passed a law to retroactively reduce the interest rates on student loans.
There Are Programs Available to Help Reduce or Eliminate Student Loan Obligations Based on Your Income
While this certainly aids people, policy wise, they are not dischargeable at this point. However, what is happening and we do handle this, is if people have federal student loans that they owe, there are programs now where you can either reduce or eliminate payment obligations depending on what your income is.
Tanya: If you got out of college and you owe $100,000 and you do not have a high paying job, for example, if you have a $30,000 a year job, you just may not be able to pay your loans or may only be able to pay $50 a month instead of the $1,000 a month that they want. You can do that without being in default as long as you cooperate with and abide by the terms of the program.
You can’t eliminate the payments through bankruptcy, but there are ways of helping make this obligation more manageable.
Municipal Employees Are Eligible for Debt Forgiveness after 10 Years of Paying Their Student Loans
Yes, that’s what the law has enabled parties to do, exactly. It is income based financing and then also after 25 years of payments, then there’s no longer an obligation. If you have a municipal job, such as a teacher or I believe as a police officer, you also are entitled to debt forgiveness after ten years.
There are certain little niches and nuances about student loans that you could take advantage of, but bankruptcy is not one of those.