Jeffrey M. Rosenblum, P.C.
A Fresh Start

Using bankruptcy to handle tax debts

While filing for bankruptcy may result in a discharge of many different types of debt, tax obligations are only released under certain circumstances. For example, being freed from tax debts is typically more likely when the individual is filing for Chapter 7 bankruptcy. Other factors that might affect the discharge might be the age and type of the tax.

Certain tax debts are not eligible to be discharged in most circumstances. For example, a flier may not be released from the obligation to penalties on tax debt. Similarly, tax debts from unfiled tax returns must also be paid. In addition, any federal tax liens that are placed on filer's property will still be enforced after the bankruptcy action has been completed.

However, other federal taxes may be discharged if the filer has met a set of eligibility requirements. The person seeking the release must have filed a tax return for the relevant tax years. These returns must have been filed for the two years before the bankruptcy was pursued. The filer must have also not committed willful tax evasion nor can they have committed tax fraud. In addition, the tax must have been levied three years before the bankruptcy filing was sought.

There are a number of other factors that might affect whet ether a consumer is able to discharge a federal tax obligation, and trying to meet all the eligibility requirements may be difficult. However, an attorney who is familiar with both bankruptcy and tax law could provide a client with some insight to their situation. After reviewing the client's finances, the attorney could help the client understand what might be discharged and might help the client pursue the action.

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