Will declaring bankruptcy remove my tax debt obligations?

People with high levels of debt that include outstanding tax bills often inquire about the effect of filing for bankruptcy. If you are one of those individuals, and you want to know if bankruptcy will free you from your back taxes, the answer is—possibly.

One of the first things that will affect the outcome is the type of bankruptcy that you file. People who want to get rid of tax debt are often advised to file under Chapter 7. Doing so is not the sole opportunity for discharge. It may be possible to achieve the desired outcome by filing a Chapter 13 or by using both chapters.

When filing under Chapter 7, you must meet several requirements to qualify for a tax discharge. To begin with, the debt must be from income taxes. If you ever engaged in fraudulent activity or tried to evade responsibility for this debt, it cannot be discharged. The debt can still only be wiped out if the taxes were due at least three years before you file for bankruptcy and you completed a tax return for them at least two years before your Chapter 7 case. Also, the tax must have been assessed by the IRS at least 240 days before you filed for bankruptcy.

When filing under Chapter 13, there a fewer requirements. It does not matter when a person filed her taxes and a person’s conduct (i.e. fraud and evasion) are not considered.

Listed above is general information regarding the possibility of tax discharge. In actuality this matter can be quite complex so your concerns about bankruptcy and taxes are best addressed by an experienced tax attorney.