Tax debt and bankruptcy

Tax debt and bankruptcy

Tax debt and bankruptcy: can taxes get discharged in bankruptcy? Sometimes, and other times, you can get a payment plan to repay them and finally be free.

Bankruptcy and Tax Debt, Generally

Like most debts, back taxes can turn into major problems. It’s helpful then to know the rule about taxes and bankruptcy. In general, most tax debt is eliminated not eliminated in a bankruptcy. However, every rules has exceptions. The exceptions here wide enough bankruptcy sometimes can eliminate tax debt.


Debts for taxes can be eliminated if:

  1. the taxes were due more than three years ago
  2. a tax return was filed two years ago
  3. the return was not fraudulent
  4. taxes were not assessed in the last 240 days

If all these factors are present, your taxes may be able to be discharged in a Chapter 7 bankruptcy.

Remove tax debt interest

If all of the above factors are not there, yet your taxes and interest are high, you may still be able to pay them without interest in a Chapter 13 bankruptcy. This can result in a savings of thousands of dollars.

Offer in Compromise

Another solution to IRS problems that a bankruptcy cannot help or is not the best fit for are Offers in Compromise. If the majority of your debt is tax debt and doesn’t fit the test above, you’ll want to contact an expert with IRS problems to help in eliminating tax debt.

Stop Tax Foreclosure

If the local county tax assessor gets a lien on your home, it’s possible to force a foreclosure. A Chapter 13 could stop tax foreclosure filed by the county for back taxes.