Including IRS Debts In A Bankruptcy

There are situations where you may be able to include IRS debts in a bankruptcy filing. However, the rules in the Bankruptcy Code governing tax obligations are quite complex, and you may wish to speak with an attorney who has experience in this area before deciding how to tackle IRS debts. When deciding whether or not an IRS debt can be included in a bankruptcy, the court will consider the type of tax owed, the age of the debt, the type of bankruptcy being sought and whether or not the debtor filed a tax return.

At Ast & Schmidt, P.C., we have been handling complicated tax debts for many decades. We offer a free consultation where we can begin to evaluate your financial situations and discuss your debt relief options. If you live in Morristown or anywhere in New Jersey and would like to learn more about how the nation's bankruptcy laws can provide you with a fresh financial start, please either use our online form to contact us or call us today at 973-984-1300.

How Courts Evaluate IRS Debts During Bankruptcy

If you file for Chapter 7 bankruptcy, the court will discharge your IRS debts as long as certain conditions are met:

  • You filed legitimate tax returns for the tax years involved.
  • The amount you owe is income tax and not penalties for tax fraud or unpaid payroll tax.
  • The tax debt is three years old or older, and the IRS assessed the debt at least 240 days before you filed for bankruptcy.
  • You did not commit willful tax evasion or tax fraud.

Bankruptcy And Federal Tax Liens

If you have been contacted by the IRS about unpaid taxes and are considering your debt relief options, you may wish to act quickly even if the debt involved meets all of the conditions listed above. This is because the IRS might place a lien against your home or other assets to encourage payment; this lien will remain in place even if the tax debt is discharged under Chapter 7. This means that the lien would have to be satisfied before the property could be sold.

Ast & Schmidt, P.C., is a debt relief agency. We help individuals file for bankruptcy relief under the Bankruptcy Code. The information you obtain at this site is not, nor is it intended to be, legal advice. You should consult an attorney for individual advice regarding your own situation.