Chapter 13 bankruptcy & back taxes

While there are only a small number of non-exempt debts that cannot be eliminate through bankruptcy, generally back taxes are one of them. And while chapter 13 bankruptcy usually won’t eliminate back taxes, filing for bankruptcy can be beneficial for two reasons: they can give you more time to earn and pay the back taxes, and secondly a chapter 13 bankruptcy can eliminate other unsecured debts leaving you with more capital to pay back your secured and priority unsecured debts.

The type of tax debt that you have is important, as some types of tax debt can be classified as nonpriority tax debt and placed into the same category as your unsecured debt. Unsecured debt can be discharged at the end of your Chapter 13 bankruptcy assuming that you made all your payments and completed your debtor education requirements. If you have debt from income taxes, then this can qualify as nonpriority debt. Additionally, you must have filed your taxes the previous years before you file bankruptcy. In order to have the taxes you owe placed in the unsecured debt they must be at least 240 days old as well.

So while generally taxes must be paid back, there instances are where you might be able to have them discharged if they meet all the aforementioned requirements. There are certain types that must be paid back, however, even if they meet those requirements which include: tax liens, recent property taxes, FICA, Medicare, and income taxes, certain employment taxes, non-punitive tax penalties, and erroneous tax refunds.

If you have question about how your tax debts will be handled during your Chapter 13 bankruptcy proceedings, consult your Dallas bankruptcy attorney to find out how you can minimize, eliminate, or get more time to pay them back.