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Discharging Taxes In Bankruptcy

What You Need to Know About Discharging Taxes In Bankruptcy

Is it possible to discharge taxes in bankruptcy? This is a question that you should take to a bankruptcy lawyer for the most comprehensive explanation of what will happen if you owe back taxes. Avoid an unpleasant surprise by learning exactly what you are you are in store for when filing for bankruptcy.

Will You Still Owe?

The fact of the matter is, most of the time tax debts are not eliminated in bankruptcy proceedings. There is a difference between the various types of bankruptcy. Chapter 7 bankruptcy cases are ones in which back taxes still are owed after the case is over. Chapter 13 cases require that you repay tax debts in full with a repayment plan.

When Will Your Tax Debts Be Discharged?

In some instances, it is possible for them to be discharged. Your best bet is a chapter 7 bankruptcy if you do not want to owe on your tax debts. However, only certain ones will qualify.

The following criteria must be met in order to qualify for discharge:

  • The debt must be at least three years old, before the date of filing.
  • Only income taxes are considered - no other type of tax debt is eliminated.
  • A tax return was filed for the taxes in question at least 2 years prior to filing.
  • You need to pass the 240 day rule, which states that the income debt be assessed by the IRS at least 240 days before you file a petition. Another exception is if it has not been assessed yet, or if an extension was filed.
  • No fraud or willful evasion was committed, as you will not be eligible under any circumstances if you committed either.

Tax Liens on Property

You cannot have a prior tax lien discharged. If the lien is placed on your property before you file, it will remain after your case is over and you will owe taxes before you can sell it.

Contact us to discuss your bankruptcy case with professionals who guarantee quality and reasonable fees.