If you’ve been researching bankruptcy issues, you know that taxes are generally non-dischargeable. So, it wouldn’t make any sense to allow debtors to discharge loans that were taken out to pay taxes would it? That’s the kind of loophole that the lenders are just not going to allow.
In fact, the Bankruptcy Code expressly prohibits the elimination of loans taken out to pay tax bills. Section 523(a)(14) of the Bankruptcy Code states that a discharge, whether under Chapter 7 or Chapter 13, does not discharge an individual debtor from any debt “incurred to pay a tax to the United States that would be non-dischargeable.” Just in case you’re wondering if that includes state taxes, Section 523(a)(14(A) covers that and states discharge, whether under Chapter 7 or Chapter 13, does not discharge an individual debtor from any debt “incurred to pay a tax to a governmental unit, other than the United States, that would be non-dischargeable.”
Trying clever “end arounds” to get of rid of debts are exactly the kind of thing that can get you in trouble and why you should consider talking to a bankruptcy attorney. An experienced attorney can guide you through the complex Bankruptcy Code and make sure that your debts are eliminated to the full extent possible. As you navigate the Internet looking for answers to your bankruptcy questions, remember that there are many misconceptions and outright untruths out there.