Generally speaking, taxes are exempt from discharge through bankruptcy. However, in some cases you can discharge an IRS debt using a Chapter 7 bankruptcy filing. The only IRS debts that can be discharged are those that
are over three years old. There are certain conditions that must be met first.
The first condition is one that is attached to most debts. This relates to fraud and, in the case of taxation, tax evasion. Debts that arise out of fraud or tax evasion cannot be discharged through bankruptcy.
Other conditions include when you filed the tax return for the debt. Your return must have been filed at least two years prior to seeking relief through a Chapter 7 filing. There is also a “240-day rule” that has to be taken into consideration.
The “240-day rule” states that the tax debt in question must have been assessed by the IRS at least 240 days before you filed your bankruptcy petition, or it must not have been assessed as yet. Once your petition for
bankruptcy under Chapter 7 has been processed, your debt to the IRS will be discharged.
This effectively wipes out your personal obligation to pay the debt, and prevents the IRS from going after your bank account or garnishing your wages. There is one exception to this – if the IRS has recorded a tax lien
on your property before you filed your petition for bankruptcy, that lien will remain on the property.
Taxation can be a particularly tricky area when it comes to bankruptcy. It is important to seek legal opinion from a qualified and respected bankruptcy lawyer before proceeding with any application. Their advice could save you a lot of heartache and perhaps hundreds, if not thousands, of dollars.
Many experts believe that we may be headed for another recession. Don’t enter a second recession with piles of debts. I can counsel you on your debts. I am sure that I can be of assistance to you, a family member or a
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