Discharge Tax Debts During Bankruptcy

  • Calculating Tax

Can tax debts be discharged during bankruptcy?

Accumulation of unpaid dues can lead to people being burdened by debts. Bankruptcy is an excellent way to get many debts discharged. However, being able to get all debts discharged is extremely tough, though not impossible. Unsecured debts are often discharged after bankruptcy however debts such as education loan, government taxes, and child and spousal support, etc. cannot be discharged during bankruptcy.

However, Los Angeles bankruptcy lawyers Recovery Law Group say that even such debts can be discharged depending on the type of bankruptcy.

For individuals filing chapter 13 bankruptcy, tax debts are paid off as per the repayment plan; while in chapter 7 bankruptcy, some tax debts are discharged depending on the nature of tax and the duration of the debt incurred. To get federal tax debt discharged under chapter 7, you need to fulfill certain requirements.

These include:

  • The debt must be more than 3 years old
  • The debt must be income tax related and not payroll or fraud penalties
  • Prior to bankruptcy filing, the taxpayer must have filed tax returns properly for more than 2 years
  • It is important that the taxpayer has made no evasion of taxes or any fraud related to tax returns previously
  • Tax assessment by IRS must be performed a minimum of 240 days prior to a bankruptcy filing

In case the aforementioned taxes are discharged, any penalties assessed on them are also liable to be dischargeable. Post discharging on debts, IRS cannot indulge in wage garnishment or any other action for collection of the debts. In case you need any assistance regarding queries about personal bankruptcy, consult bankruptcy attorneys at 888-297-6023 to put a stay on repossession and foreclosure as well as getting rid of your debts.