IRS debt

Your question really seeks legal advice that is impossible to give in a public forum or without a full understanding of all of the facts of your anticipated bankruptcy case filing. The type of tax debt, which government the tax debt is owed to, whether the tax debt is now the subject of a recorded lien, and a great many other technical factors including timing of the assessment and the return’s filing date, and can impact the legal analysis concerning the dischargability of a tax debt.

Although there can be a limited circumstance when a certain type of tax debt is either dischargeable or can be paid over time in a reorganization plan, you should always assume that tax debts (particularly to the federal government) are not dischargeable.

For this reason, many financial commentators properly urge the public to treat the government tax liabilities as a preferred debt (after your home and food) when you are in a financially difficult scenario.

To understand your rights in this respect, you should take this issue up with a skilled bankruptcy and or tax attorney in your state.

Note: This Answer and any information contained in this answer is not intended to be treated as legal advice; And, this posting does not create an attorney-client relationship or privilege of any kind.

Filing bankruptcy when you have tax issues is just not a "do it yourselfer." Please, please, please get good representation from a local bankruptcy attorney.

However, I can help you to understand the tax issues in very general terms. However, this is only a generality and there may be exceptions in anyone's case that may cause a different (bad) result. You simply have got to get expert hands on advice from a bankruptcy attorney and tax specialist to really know how things stand in your own case.

Income taxes may discharge if all of the following criteria are met, (and be sure to discuss your tax issues with your attorney before you do anything else):

1. The taxes must be more than three years old at the time the Bankruptcy was filed. The three-year period begins to run from the time the returns were due, (often that is April 15th of the following year, but sometimes a different date applies) plus any periods of extension;

2. If the return was not filed on time, more than two years has expired since the return was filed;

3. If there was an assessment, more than 240 days have expired from the date of the assessment;

4. A lien on any assets which you intend to keep will not be automatically removed, even if the tax is discharged!

5. There has been no fraud, and no intentional evasion of paying the tax.

If you intend to discharge taxes with your bankruptcy filing, I recommend that you obtain a complete history of your tax obligations from the I.R.S. and consult a tax professional before filing the bankruptcy. That is the best way to find out what you can expect.

You can read more about bankruptcy and related topics in my Guide.

The purpose of bankruptcy law is that the honest debtor should be given a “fresh start” through the discharge of debts. Not all debts, however, are dischargeable. The following types of debts are generally non-dischargeable:

- Most taxes, including most debts to the IRS
- Debts that the Bankruptcy Court determines are non-dischargeable because of fraud, false pretense, misrepresentations or willful and malicious injury to property
- Debts that you did not schedule
- Debts owed to a spouse, former spouse or child for alimony, maintenance and support, or property settlement agreements
- Debts for fines, penalties or restitution for criminal activity
- Debts for damages for driving while intoxicated
- Student Loans
- Debts for securities law violations