Although most people believe that income tax debt is not dischargeable in a Chapter 7 bankruptcy, this is not 100% true. There are some situations where a tax debt would be able to be discharged without payment; however, certain criteria must be met.
If You Can Answer Yes to All of the Below, You May Be Able to Have Your Tax Debt Written Off
- Were the tax returns you are attempting to discharge due three years before you filed bankruptcy?
- Has the government had at least 240 days to assess the money you owe?
- Were all tax returns you are seeking a discharge for filed over two years before you filed bankruptcy?
- Are you unable to pay because of financial distress and not because you are willfully attempting to evade your taxes?
- Were none of your tax returns completed fraudulently?
Although meeting the above criteria is not necessarily a complete guarantee that your income tax debt will be written off under a bankruptcy, most of the time it will be enough to accomplish a discharge.
When You Can’t Get Income Tax Debt Written Off
Of course there are situations in which you will be unable to have your income tax debt discharged, even if the above criteria are indeed met. For example, if the government has already attached a tax lien to your assets, you won’t be able to have the debt discharged in a bankruptcy filing. The caveat here is that as long as the tax lien stands and you owe the debt, any new assets you accrue will also be put under the lien.
So, Do You Need an Attorney?
If you have any tax debt and are struggling to make the payments on it, it’s a good idea to consult with a bankruptcy attorney about what options may be available to you. In many cases, there are relief options that you aren’t aware of that may serve to help you, even in the event that your tax debt is not eligible for discharge.
Ted Williams Jr. is an experienced bankruptcy lawyer who has assisted many families in overcoming all types of debt, including tax debt. Contact the office today to discuss what you may be able to do to get rid of your tax debt, or how you may be able to manage other debts so you are better able to meet your tax obligations. Call now at (205) 623-4443.