Tax Debt and Bankruptcy

Every working person in the USA owes taxes and the IRS knows it.  However, in a bankruptcy, you might be able to have some of your tax debt forgiven.  This is not always the case, but it is worth looking into.

How Can I Know If I Qualify For an Exemption?

Federal tax liens are not dischargeable.  If the IRS has filed a lien on your assets, your tax lien cannot be removed.  If you are filing a Chapter 13 bankruptcy, you will likely have to pay your taxes in full through your bankruptcy payment plan.  But, if you qualify for a Chapter 7 bankruptcy, there are certain circumstances that allow you to discharge your relatively old tax debts.

In a Chapter 7 bankruptcy, income taxes get written off if the following conditions are met.  All other taxes must be paid.

1. There can be no sign of fraud or evasion
2. The tax debt must have been due at least 3 years prior
3. Tax returns have been filed
4. Any IRS assessment must have happened more than 240 days before the bankruptcy filing

If any of the above mentioned conditions are not met, you will still have to pay your tax debt even after a Chapter 7 bankruptcy.  Be sure to keep your tax payments current if this is the case.

If you have questions or issues that need to be resolved, contact your local Yuba City bankruptcy attorney at (530) 797-4402.