Most people are astonished to discover that they can discharge certain tax liabilities in bankruptcy. The type of tax debts typically discharged in bankruptcy are income taxes and sales taxes. Payroll taxes or trust fund taxes are not dischargeable in bankruptcy.

Certain criteria must be met to discharge taxes. First the tax return must be filed. Secondly the taxes must be three years old from the date they first became due. For example a 2005 tax return is due by April 15, 2006, and if it was filed timely it would be dischargeable after April 15, 2009. In addition, fraudulent returns or willful attempts to evade a tax are not dischargeable. If a person files a late tax return for a year that otherwise would be dischargeable then they must wait two years from the date that the return was filed to become dischargeable.

Other debts owed to the government may also be dischargeable. Small business loans are dischargeable in bankruptcy as well as other types of debts for services provided by the government. Overpayment of social security benefits can be discharged in bankruptcy. Government debts which are not dischargeable in bankruptcy are fines, criminal restitution and generally student loans. Student loans may be discharged if the Debtor can prove undue hardship which is generally very difficult. Inability to pay alone does not prove undue hardship.

In order to determine what types of debts can be discharged in bankruptcy it is important to consult with a bankruptcy attorney who is an expert in bankruptcy law.

Article provided by Michigan Bankruptcy Attorney John Steinberger.