Are taxes dischargeable in bankruptcy? The short answer is “sometimes”. If the debts are relatively old and they meet several other conditions, the taxes are dischargable in a bankruptcy; however, you may have to file a complaint in the bankruptcy court to have a Judge determine the dischargeablity of the taxes debts in order to have the IRS honor the discharge.
Generally speaking, for taxes dischargeable in bankruptcy, you must meet all of these conditions:
1 You filed a legitimate tax return.
2 The tax returned was filed at least two years before filing bankruptcy.
3 The tax liability you want to discharge was due at least three years before filing bankruptcy.
4 The IRS has not assessed your liability within 240 days.
5 You did not willfully evade payment of a tax.
A couple of additional notes. Penalties for the taxes dischargeable in bankruptcy are also dischargeable, if the taxes are dischargeable in bankruptcy. But courts are split as to whether you can discharge tax penalties of nondischargeable taxes.
However, if the taxing authority has put a lien on your property, the lien will remain after your bankruptcy. You will have to pay off the lien before you can sell the real estate will a clear title even if the tax was discharged.
As you can see it’s COMPLICATED! If you are considering bankruptcy because of your tax debts, consider a consultation with a bankruptcy attorney experienced in discharging taxes in a bankruptcy.
A word of caution, if you get a loan to pay taxes what would otherwise not be discharged in bankruptcy, you can not eliminate that debt in a chapter 7 bankruptcy. You can’t turn nondischargeable taxes in a bankruptcy into a discharageable debt in a chapter 7 bankruptcy. A chapter 13 might be a better alternative for you in this case.
For more information about Bankruptcy and Taxes – contact Cynthia Remboldt, at the Remboldt Law Firm at 404-348-4081. FREE consultations can be scheduled by calling 404-348-4081. Evening and Weekend hours are available to meet with an attorney. If bankruptcy turns out to be the best way to move forward considering your alternatives, goals and financial challenges, payment plans are available if you need them.