Taxes Dischargeable in Bankruptcy

You may not know that some tax debts can be eliminated in bankruptcy. Some IRS tax debts can in fact be discharged in bankruptcy.

You may be eligible for bankruptcy relief for unpaid taxes owed to the IRS if:

  • You have tax debts that are more than three years old and for which the tax return was filed more than 240 days prior to filing the bankruptcy petition (both rules have to be met)
  • Over three years have passed since returns were last due
  • There is no evidence of evasion or fraud
  • A notice of the IRS’s tax lien has not been filed

Bankruptcy cases can be particularly complex, and on top of that, bankruptcy tax laws are constantly changing. If you are seeking information about bankruptcy related to tax debt, please contact us to discuss your options.

What are some benefits of filing for bankruptcy?

bankruptcy tax

Even if you are not relieved of the entire debt through your bankruptcy, you should be able to stop collection activities and interest accrual during the time the bankruptcy case is open. You may also be able to restructure your tax debt in bankruptcy.

Because bankruptcy will halt collection efforts on all fronts, it is sometimes a viable option for stopping the IRS from levying on wages or other assets. In addition, if your tax debt is dischargeable in bankruptcy, the threat of filing bankruptcy can force the IRS to settle your tax debt on your terms.

What are the disadvantages of bankruptcy?

Filing bankruptcy is not something anyone plans on–but, life happens. Sometimes events come up that cause extreme debt that you are not able to get out of. Bankruptcy is an option one may consider if you want to get rid of your debts for a fresh start.

The decision to file bankruptcy is a big one. The decision should be made carefully and only with professional consultation.

The bankruptcy will damage your credit score for a significant period of time, during which you will not qualify for financing.

While it does make the promise of erasing most debt, some tax and student loan debt may not qualify for bankruptcy. In addition, IRS liens may survive the bankruptcy process and, to the extent that the tax debt is not discharged in bankruptcy, the IRS may view you (now having fewer debts) as being in a better position to pay the IRS. It’s important that you get a clear picture of how a bankruptcy will affect your specific situation before making a final decision.

If you are struggling with tax debt, call us to see if bankruptcy is the an option for you, or if you may qualify for other debt relief such as an offer in compromise or partial payment installment agreement.

See if your tax debts may be dischargeable in bankruptcy.

We are former IRS attorneys, appeals officers, and auditors who help taxpayers with unpaid tax debts. We offer compassionate, individualized service at manageable rates.

If you are in a situation where you cannot pay your debt owing, call today for a confidential consultation. Our number is 800-521-0230.

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