Discharge Tax Debt In Bankruptcy

Many have questions as to whether you are able to discharge tax debt in a Chapter 7 or Chapter 13 bankruptcy. The short answer is YES and NO.
Tax debt to the Internal Revenue Service (IRS) and the Franchise Tax Board can be eliminated as long as you meet the relevant factors. The main factor is the age of the tax debt. If you have a tax debt that is a couple years old, you will not be able to discharge the debt. There are three factors one has to meet in order to successfully discharge a tax debt:

1. the debt has to be more than 3 years since the returns were last DUE (including extensions) to be filed
2. the returns were timely filed or it has been at least 2 years since the returns were filed, and
3. there was no fraud involved or attempts to evade the tax, AND
4. the taxes were not assessed within the last 240 days.

If you meet this criteria, the chances of you discharging your debt are extremely great. However, even if you cannot discharge tax debt in a Chapter 7 bankruptcy, you may be able to create a more favorable repayment plan for the taxes in a chapter 13.

Bankruptcy tax debt is extremely tricky and you must correctly determine whether it can be discharged in bankruptcy. To do so you must find an extremely experienced Bankruptcy Attorney with knowledge to analyze your situation. Remember, bankruptcy is an alternative to dealing with your tax debt. This is particularly true if it has been more than 3 years since the tax returns for the years you owe were last due to be filed.