Discharging Government Debt

Abstract

The bankruptcy system tries to strike a balance between a fresh economic start through debt forgiveness, or discharge, and the need to repay creditors. When the debt is owed to the government, the scale seemingly tips towards repayment because of the government's role in providing essential services to society. However, there are certain debts that are owed to the government that can be forgiven in bankruptcy and some that cannot. The consumer bankruptcy system does not forgive government-owed child support debt, penal debt, and student loan debt, which are disproportionally carried by poor women and racial minorities, but does forgive government-owed tax debts and loans. Since one of the primary purposes of the consumer bankruptcy system is debt relief for economically vulnerable individuals, this Article advocates for targeted reforms to the bankruptcy system and discharge guidelines to promote a more generalized standard of discharge when the debt is owed to the government and further advances the debate about whether there should be nondischargeable debt in the consumer bankruptcy system.

Keywords: student loan debt, criminal fines and fees, government debt, poverty, discrimination, bankruptcy discharge, socioeconomic inequality