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Many taxpayers are mistaken in their belief that taxes are not dischargeable
under bankruptcy law. There are various possibilities to discharge tax liabilities through bankruptcy.
Chapter 7 and Chapter 13 are very powerful tools.
Like the IRS Offers in Compromise program, the Bankruptcy Code allows
taxpayers in some instances "a fresh start" by discharging old income tax obligations. Bankruptcy
may offer the chance for discharging income tax liabilities in full in a Chapter 7 action, or taxpayers can
make monthly payments on IRS debt not discharged in a Chapter 13 action, often stopping the interest and
penalties from accruing.
Major bankruptcy reform has occurred recently, aimed at correcting
unbridled consumer debt relief. The bankruptcy reform legislation was placed on the legislative backburner
in the wake of the recent terrorist attacks on New York City and Washington, D.C., according to Congress
Daily. For many taxpayers, the IRS Offer in Compromise program may become more attractive.
Generally, personal income taxes may be discharged when the taxes are at least three years old, were
assessed at least 240 days prior to the bankruptcy filing, and were voluntarily filed at least two years ago.
If you are considering filing bankruptcy, and the IRS has filed a substituted return on your behalf (SFR), it
is advisable to consult an attorney prior to filing your original returns.
 Income taxes less than three years old
Taxes filed less than two years ago
Taxes assessed less than 240 days ago
While a Chapter 7 filing may not be right for you, an attorney may well recommend that
you file for Chapter 13, which is a payment plan.
Please feel free to contact us for more information about our
Bankruptcy Services. Email Us
or give us a call at (800) 982 0462. We look forward to hearing from you.
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