Discharging Tax Debt in your Chapter 7 Bankrutpcy


People filing for chapter 7 bankruptcy protection often wonder whether or not their income tax debts will be discharged. The good news is tax debts are dischargeable if certain criteria are met.

First, if you want to discharge your tax debt you must have filed returns for the years you owe. Second, the returns were filed at least two years prior to your bankruptcy filing date. Third, the returns in question were due at least three years before you file. Fourth, the IRS or State has not assessed your tax liability within 240 days before the filing. Finally, you did not willfully attempt to evade paying taxes.

However, other types of tax liabilities have different rules. Property taxes are not discharged during Chapter 7 Bankruptcy unless they became due more than a year before your file for bankruptcy. Further, debts incurred to pay taxes cannot be discharged. For example, if you use a credit card to pay your taxes you will have to pay back the creditor who issued the card even if all your other debt is discharged. Finally you may be wondering if tax obligations are dischargeable if you filed late tax returns. The answer is it depends. For a long time the IRS would not allow any taxes owed on late returns to be discharged. However, now the IRS only applies this no-discharge rule to late returns if they were filed within two years prior to your bankruptcy filing.

Written by Hoglund Law

The attorneys of Hoglund law are licensed in Minnesota, Wisconsin and Ohio. Hoglund, Chwialkowski & Mrozik, PLLC is based in Roseville, Minnesota. In addition to handling cases involving bankruptcy & social security, Hoglund, Chwialkowski & Mrozik, PLLC handles faulty drugs and toxic exposure.

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