Eliminating Tax Debt In Bankruptcy

Can tax debt be discharged in bankruptcy?

Yes. And no. The first thing to understand about bankruptcy is that it is a legal procedure created by Congress. There is no such thing as “discharging“ tax debt. What there is, is discharging a tax debt. The statute that allows for bankruptcy also allows for the discharge of debts it calls “non–dischargeable.” Tax debts are non–dischargeable. This means that you can never get rid of your tax debt.

What are the advantages of getting my taxes discharged in bankruptcy?

The big advantage is that it gets rid of the debt. You don‘t owe taxes anymore. You may also be able to get rid of other debts, like debts from unpaid medical bills.

What are the disadvantages of getting my taxes discharged in bankruptcy?

Discharging a tax debt does not eliminate the tax debt. It doesn‘t mean the government will let you off the hook. It does not mean that you won‘t have to file taxes again. It does not mean that you won‘t have to pay taxes again. All it means is that you can get rid of the obligation to pay the debt.

How does a tax debt get discharged?

First, you must file for bankruptcy. If you are a debtor in a Chapter 7 bankruptcy, you must complete the bankruptcy forms in a certain way. You must also file the forms with the bankruptcy court. If you do all of this, the court will issue an order certifying your bankruptcy. Once the bankruptcy is certified, you will receive a notice from the IRS. This notice will contain certain information that you must include in your bankruptcy papers. You then complete the bankruptcy forms in a certain way. Finally, you must file your bankruptcy papers with the court. Once this is done, the court will issue an order that says that you don‘t have to pay the tax debt anymore. 

From tax debt to student loans, we are bankruptcy experts. We have helped thousands of families get out of debt and can help you too. Contact our Hurst bankruptcy office today.