Tax Debt and Your Bankruptcy

Many tax debts are not able to be discharged in bankruptcy, but some are. Federal taxes in particular are not dischargeable, and if a large part of your outstanding debt consists of federal tax debt, it may make a big difference in whether you choose to file for Chapter 7 or Chapter 13 Fort Worth bankruptcy.

Some Tax Debt Can Be Discharged

Income tax debt can be discharged in Chapter 7 liquidation, but other taxes such as payroll taxes or fraud penalties cannot. Any income tax debt you need discharged must pass a set of rules as to the date of filing, how long the taxes are past due, and other concerns.

In addition, if you have submitted an offer in compromise (in which you seek to settle your debt for less than the amount owed) or obtained a taxpayer assistance order from the IRS, this changes the amount of time your taxes must be outstanding prior to being eligible for discharge via Chapter 7. If you have previously filed for bankruptcy, all the time periods in question were held in stasis while the prior bankruptcy proceeding unfolded, and you must add this time into the figure.

Even if you are able to discharge your tax debt via Chapter 7, if the federal government had placed a lien on your property prior to the filing they still have the authority to collect on that lien.

Having the knowledge at your disposal is key to understanding your debt situation, and deciding whether filing ankruptcy is the right financial move for you.