How to Cancel Marital Debt During a Massachusetts Divorce

by | Jun 19, 2023 | Divorce |

Marital debt can be a heavy burden for many Massachusetts residents, causing stress and financial hardships for individuals and families. However, you may be surprised to find that not all debt is set in stone forever.

In some cases, it can be canceled or forgiven. So what is canceled debt and what debts can be canceled? 

Understanding Canceled Debt

Canceled debt, also known as debt forgiveness or discharge, occurs when a creditor agrees to release a borrower from the obligation to repay all or a portion of their outstanding debt. In some cases, the borrower may need to meet specific qualifications or undergo a process to qualify for debt cancellation.

It’s important to note that canceled debt may have tax implications, as the IRS may consider the forgiven amount as taxable income. Before making any significant financial decisions, consult with a debt forgiveness professional.

Medical Debt

Due to rising healthcare costs in the U.S., those who have had a recent injury or illness in the family may be hit hard by medical debt . In some cases, this debt may be eligible for forgiveness. Here are some ways in which you may be able to lower or cancel your medical debt.


One way to potentially cancel medical debt is through negotiation with your healthcare provider or hospital. By discussing your financial situation and any errors or discrepancies in your bill, you may be able to secure a reduced payment amount or a complete debt cancellation.

Financial Assistance Programs

Many hospitals and healthcare providers offer financial assistance programs, which can help cover the cost of care for individuals facing financial hardship. These programs often have income eligibility requirements and may require documentation to support your application.

Nonprofit and Charity Organizations

Some nonprofit organizations and charities offer support to individuals struggling with medical debt. They may directly negotiate with healthcare providers on your behalf or provide financial assistance to cover a portion or all of your outstanding debt.

Student Loan Debt

Student loan debt is another common financial challenge for many, particularly for recent graduates. There may be several options available to you for canceling student loan debt, depending on the type of loan and your specific circumstances.

Public Service Loan Forgiveness (PSLF)

The PSLF program is designed for individuals working in qualifying public service jobs, such as government or nonprofit organizations. After making 120 qualifying monthly payments under a qualifying repayment plan, the remaining loan balance may be forgiven.

Teacher Loan Forgiveness

Teachers working in low-income schools or educational service agencies may be eligible for loan forgiveness. Depending on the subject taught and the length of service, teachers can have up to $17,500 of their Direct or FFEL Program loans forgiven.

Disability Discharge

Borrowers who are permanently and totally disabled may be eligible for a total and permanent disability (TPD) discharge, which cancels the outstanding balance of their federal student loans.

Tax Debt

Tax debt can be a considerable source of stress for individuals who owe money to the IRS. The federal government offers various programs for people who owe taxes, some of which can decrease, pause or cancel tax debt.

Offer in Compromise

An OIC is an individual agreement between a taxpayer and the IRS that allows the taxpayer in question to settle their tax debt for a smaller amount than what they currently owe. To qualify for an OIC, you must demonstrate that being forced to pay the full amount would cause financial hardship or that you are financially unable to do so.

The IRS evaluates each OIC application on a case-by-case basis, considering factors such as income, expenses and asset equity.

Currently Not Collectible Status

If you are currently experiencing financial hardship and cannot pay your tax debt, the IRS may temporarily pause collection efforts and place your account in CNC status. While this does not actually cancel the debt, it provides temporary relief from collections, including wage garnishments or bank levies.

The IRS will periodically review your financial situation to determine if your status should change.


In some cases, it may be possible for tax debt to be canceled through bankruptcy. To qualify, the tax debt must meet specific criteria, such as being income tax debt, at least three years old, and not assessed due to fraud or tax evasion.

Before taking action, make sure to consult with a bankruptcy attorney or tax professional to determine if this option is suitable for your situation.

Next Steps

Now that you know more about canceling medical debt, student loans and tax debt, you can find out if any of these options apply to your particular financial situation. Other types of debt may also be forgiven in some cases, though every situation is different and the decision is often up to your loan provider.

Remember, it’s important to seek professional advice when considering debt cancellation options, as individual circumstances and eligibility criteria may vary.

During Massachusetts divorce proceedings, marital and individual debt is an important issue to address.

Should you be in the midst of a divorce or contemplating divorce, contact the Law Offices of Renee Lazar at 978-844-4095 to schedule a FREE one hour no obligation consultation.

Set Up A Free Initial Consultation