You may have heard that tax debts are not dischargeable in bankruptcy. The truth is that some tax debts are eligible for bankruptcy, but there are specific rules as to which debts qualify.
Settling Tax Debts
The IRS is one of the most dreaded agencies around. No one likes to talk about, deal with or even think about their taxes until April of each year. The problem with this approach is that it can lead to tax debt problems, which could result in consequences like wage garnishment or tax liens. However, there are ways to deal with your debts and settle your unpaid taxes.
In order for a tax debt to qualify for bankruptcy it must meet certain requirements. First, the debt must be an income tax debt that is at least three years old. Next, a tax return for the debt in question must have been filed at least two years prior to filing for bankruptcy. Last, the taxes must have been assessed by the IRS at least 240 days prior to the filing.
If a tax debt does not meet this requirement, there are still ways to resolve them directly through the IRS. An IRS installment plan can allow you to repay your debts through a series of smaller payments across a two or three year period. If you cannot afford to repay your debts, you may be able to obtain a reduction in the amount of debt owed through an IRS Offer In Compromise.