Eliminating Tax Debt Through Bankruptcy
Dallas / Fort Worth / Plano Tax Debt Bankruptcy Attorney
Most people don’t realize they can eliminate some tax debt through a Chapter 7 or Chapter 13 bankruptcy. In fact, under bankruptcy law it’s possible to discharge some income tax debt; however, payroll tax, unemployment insurance dues, and sales tax debt are not dischargeable through bankruptcy. Depending on the value of your assets and the kind of tax debt involved, if your tax debt is at least three years old, it may be possible to eliminate it through either Chapter 7 or Chapter 13 bankruptcy. There are, of course, a number of other factors that must be taken into consideration in relation to the IRS (Internal Revenue Service) and what you will be required to do to include tax debt in your bankruptcy.
What Tax Debt is Eligible for Discharge through Bankruptcy?
In order to discharge tax debt through Chapter 7 or Chapter 13 bankruptcy, the tax debt in question must meet the following requirements link to:
• The tax debt must be at least three years old
• It must be related to a return filed at least two years prior to your filing for bankruptcy
• The tax debt involved cannot be part of a fraudulent tax return
• You can’t be involved in tax evasion or guilty of attempting tax evasion
• The IRS must assess your tax debt at least 240 days prior to your filing for bankruptcy, acknowledging the tax debt you owe.
Tax Liens, Chapter 7, and Income Tax Debt
Under bankruptcy law, you cannot eliminate prior recorded tax liens through a Chapter 7 bankruptcy. However, Chapter 7 will eliminate personal tax debt while preventing the IRS from garnishing your wages. If the IRS placed a tax lien against you prior to your filing for bankruptcy, the lien cannot be removed, requiring you to pay the lien in order to sell the property in question. If you have tax debt on non-filed returns, filing for Chapter 7 bankruptcy will not eliminate these debts since the IRS continually assesses debt on those who don’t file taxes.
The Bankruptcy Court and the Elimination of Tax Debt
Assuming your tax debt meets the conditions discussed above, you’re also required to provide a tax return for each year going back two years prior to your filing for bankruptcy. Should any of your creditors want a copy of your most recent tax return, you’ll be required to provide one to them. While eliminating tax debt through bankruptcy involves hurdles to clear, it’s not impossible to do so. With the guidance of an experienced bankruptcy lawyer, eliminating tax debt can be a relatively straightforward process.
For additional information regarding bankruptcy and tax debt, contact Dallas-Fort
Worth-Plano bankruptcy attorneys at Leinart Law
Firm today to learn how we can help you.