I am in debt on my mortgage, credit cards, and have a tax lien. If I file bankruptcy, will the tax lien be gone also?

Question: I’m drowning in debt on my credit cards, mortgage,  to a contractor who worked on my house, and $50,000 on a tax lien. I’m thinking of filing bankruptcy. I know it can help me with the other debts, but will it also help me with the tax lien?

Response: Maybe, though probably not.  Filing bankruptcy will delay execution of the lien, so it will buy you some breathing space. However, contrary to popular belief, not all debts are dischargeable in bankruptcy. The bankruptcy rules exclude certain debts as a matter of public policy—that is, it’s viewed as bad thing for society to let a debtor get out from under certain debts, such as student loans or damages owed by reason of drunk driving.

Another type of debt that is generally exempt from discharge in bankruptcy are tax debts owed to the government. (Not surprisingly, the government—which makes the bankruptcy rules—thinks it would be a bad thing to not pay the government.)

Without knowing the form of bankruptcy (Chapter 7 or 13) and the type of tax debt or lien, I can’t say for certain that you would not be able to discharge it. You can look in the U.S. Code relating to the type of bankruptcy you’re contemplating to see if the tax lien and debt can be discharged, but odds are that can’t be.

Answered by Steven Zweig

Additional Resource: Filing for Bankruptcy

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