Can Bankruptcy Erase My Tax Debts?

Many individual debtors who file for bankruptcy, especially under Chapter 7, do so in order to receive a discharge of their debts and to get a clean start financially speaking. A wide range of common consumer debts are eligible for discharge under the US Bankruptcy Code, and those debts often include credit card debt, medical debt, personal loan, and even student loan debt in many circumstances. Once debts are discharged, they are erased for the debtor for all intents and purposes — the debtor is no longer liable for the debts. There are some forms of debt, however, that are classified as exceptions to discharge according to the Bankruptcy Code. One type of debt that is listed in this section is “a tax or a customs duty,” with additional details that follow in the Bankruptcy Code.

If you have heard that tax debt is an exception to discharge, you may be wondering: Can bankruptcy erase my tax debts? The answer to that question is not as black and white as you might assume. While some tax debts are in fact exceptions to discharge and thus cannot be discharged in a bankruptcy case, some tax debts are eligible for discharge. Our West Palm Beach bankruptcy lawyer can explain.

Federal Income Tax Debt is the Only Type of Tax That Might Be Dischargeable 

First, it is important to know that federal income tax debt is the only type of tax debt that may be dischargeable. What this means is that you cannot have, for example, tax debt associated with your property taxes on real property or a motor vehicle, or employment taxes if you own a sole proprietorship, discharged in your bankruptcy case. Any other type of tax debt also cannot be discharged.

Yet not all federal income tax debt is dischargeable. In order for it to be discharged in a bankruptcy case, the debtor must meet certain requirements that we explain below.

Requirements to Have Federal Income Tax Debt Discharged 

There are several requirements that you must meet in order to have federal income tax debt discharged in a personal bankruptcy case. Those requirements include the following:

• You have not engaged in any type of tax fraud or tax evasion, including submitting any fraudulent information on a tax return;
• You filed a tax return for the federal income tax debt you want to have discharged, and the return was filed at least two years before you filed for bankruptcy;
• The tax debt you want to have discharged is at least three years old (meaning it was due at least three years before you filed for bankruptcy); and
• The Internal Revenue Service (IRS) assessed your tax debt at least 240 days before you filed for bankruptcy.

Contact Our West Palm Beach Bankruptcy Lawyers Today 

If you are considering a bankruptcy filing and hoping that all or part of your tax debt will be eligible for discharge, it is essential to seek advice from an attorney who can assess the particular details of your case and can assist you with your bankruptcy filing. One of the experienced West Palm Beach bankruptcy attorneys at Kelley, Fulton, Kaplan & Eller can talk to you today to learn more about the nature of your tax debt and to provide you with additional information about dischargeability. Contact us to learn more about how we can help you.

Source:

law.cornell.edu/uscode/text/11/523