Taxes and Bankruptcy

Benjamin Franklin once wrote, “In this world nothing can be said to be certain, except death and taxes.” Taxes – if we live in the United States, we have to pay them.

However, if you have owed income tax to the government for more than three years, bankruptcy might be able to help you get out from underneath the weight of that debt.

If you file a Chapter 7, you can be forgiven your federal income tax debt, as long as:

• You have owed the income tax for more than three years.
• You filed the tax returns, for the debt you wish to discharge, more than two years ago.
• The IRS has not assessed your tax returns in the last 240 days.
• There is no fraud.

Whatever taxes that does not get discharged (forgiven), you’ll still have to pay after Chapter 7.

What if your taxes are non-dischargeable because it doesn’t mean the rules? That’s where Chapter 13 can come in handy. In Chapter 13, you will pay this money back in monthly payments that will be stretched out over three or five years.

A Chapter 13 can be a lifesaver because it transforms your tax debt into a manageable monthly payment.