Many people believe that back taxes are one of the few debt types that can not be resolved through bankruptcy but this is not always true. Both chapter 7 and chapter 13 of the bankruptcy code will allow back taxes owed to be discharged in certain cases when all of the requirements are met. If these requirements are met then past due tax debt may be discharged by the bankruptcy court. These include:
- The taxes owed must be at least 3 years past due for this type of debt to be eligible for discharge. This time requirement may vary some depending on whether or not an extension was requested and granted or not.
- The tax returns for the unpaid tax debt must be filed at least 2 years before you petition for bankruptcy.
- You must not have committed any tax fraud or tax evasion to qualify for tax debt to be discharged through bankruptcy.
- The IRS must be able to access the tax debts that you owe for a minimum of 240 days before you file a bankruptcy petition with the bankruptcy court. This time line may be affected if you submitted an offer in compromise for the tax debt before you file for bankruptcy.
An experienced bankruptcy attorney can evaluate your case and help determine whether you have tax debt that qualifies for a discharge under the current bankruptcy laws. Each case is different and a qualified bankruptcy specialist can provide the answers that you need concerning all of your debts. It is possible to discharge unpaid tax debts through bankruptcy in many cases, but this may not always be the best solution or even possible sometimes.
In some cases an experienced bankruptcy attorney may advise that you wait to file, so that the unpaid tax debts will meet all of the bankruptcy discharge requirements. If the taxes were only files a year and a half ago, or the debt only dates back 2 years, then you may be better off waiting for a period to ensure that your unpaid taxes meet the discharge requirements. In some cases the IRS may put a tax lien against property that you own, and filing for bankruptcy may or may not affect this lien and the underlying property. In some cases filing for bankruptcy protection may be ideal, but in other situations it may be better to wait to file.
The right bankruptcy lawyer will advise you on when to file so that you get the best possible results from you bankruptcy case. The bankruptcy laws are complicated and the process is complex. When you file can be just as important as the exemptions that you choose. Both of these elements require significant bankruptcy experience and knowledge. This is exactly what you get when you choose a bankruptcy attorney who is experienced, and also an attorney who specializes in all forms of consumer and business debt relief not just bankruptcy cases.