Filing a Chapter 7 bankruptcy can help you to get out of a great deal of debt, including medical bills, credit card debt, and more. However, tax debt is considered a “secured” debt and isn’t as easy to get out of. But, if you meet certain criteria, back taxes could be discharged like credit card debt or medical bills. Here’s how you may be able to dissolve your tax debt by filing for bankruptcy.
Have You Filed a Tax Return?
You must have filed a tax return for the year(s) of taxes you wish to discharge under a Chapter 7 bankruptcy. If you did not file a tax return, you will not be eligible to discharge that debt for a period of time after you file. See below for more details.
Do You Owe Only Income Taxes?
You must only owe income taxes to be eligible to have the debt discharged. If you owe penalties for tax fraud or you owe payroll taxes, these debts are considered to be “undischargeable”. This means that at some point, you will need to pay what you owe. A bankruptcy will not help you get out of those two types of tax debt. A bankruptcy also will not help you if a tax lien is placed on any property of yours.
Are the Taxes You Owe Greater than Three Years Old?
You will only be eligible to have tax debt that is greater than three years old discharged. If you filed for a particular year late, you will be eligible to have that debt discharged three years after the file date. This means that if you owed taxes for 2012, but did not file your 2012 return until 2017, you will not be eligible for those taxes to be discharged until the year 2020.
Do You Pass the 240-Day Rule?
The IRS must have evaluated your taxes 240 days prior to your bankruptcy filing or not at all — if they evaluating your taxes within the 240 day period, you will not be able to list that debt in your bankruptcy filings.
Call the Law Office of Howard Tagg Today
You don’t have to face overwhelming tax debt alone. You may have options that allow you to have your tax debt discharged if you meet the above criteria. Contact our office today for a consultation to learn more about bankruptcy and tax debt by calling (903) 730-6366.