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Can I Resolve Tax Debt with Bankruptcy?

Taxes are almost due, and you may be experiencing financial hardship that makes it impossible to pay your tax bill. When considering your options, you may have thought about bankruptcy. Fortunately, you can resolve certain kinds of tax debt by filing for bankruptcy, but it’s important to hire an experienced attorney who can help you secure a discharge for tax debt.

What Kinds of Tax Debt Are Dischargeable?

You can discharge federal, state, and local income tax debt, as well as penalties and interest, by filing for Chapter 7, Chapter 11, or Chapter 13 bankruptcy.

In order for tax debt to be dischargeable in bankruptcy proceedings, it must meet three criteria:

  • The debt must have been incurred more than three years prior to filing for bankruptcy
  • You must have filed a return for the year(s) in question at least two years prior to filing for bankruptcy
  • You must have paid any taxes due more than 240 days prior to filing for bankruptcy

Additionally, the debt must not be a result of fraud or willful evasion/neglect of tax laws in order to be eligible for discharge. Tax debts resulting from income received during the three-year period before filing may also not be discharged under Chapter 7 bankruptcy proceedings.

Are There Tax Debts I Can’t Discharge?

It’s important to note that certain types of taxes are not dischargeable at all. Some of these include payroll and trust fund taxes, which are generally considered priority debts and must still be paid regardless of your bankruptcy status.

If you have questions about whether bankruptcy is an appropriate way to resolve your tax debt, contact an experienced bankruptcy lawyer to discuss your situation. An experienced attorney can help you understand your options and determine the best way to move forward with your tax debt.

For more information or to schedule a free consultation with Nguyen Law Group, contact us online!