Tax Debt
Some types of tax debts may be eligible for elimination under the Chapter 7 or Chapter 13 bankruptcy code. There are many rules and conditions as to which types of tax debts are dischargeable. The bankruptcy law outlines specific criteria for tax debt eligibility.
A tax debt can be discharged if it meets the following conditions:
(1) The taxes are income taxes.
(2) The taxes were not accrued fraudulently and/or there was no attempt to evade payment.
(3) A tax return was filed for the debt seeking to be discharged.
(4) The debt is at least three years old from the time of filing for bankruptcy.
(5) The income tax debt has been assessed by the IRS at least 240 days prior to filing for bankruptcy.
Some tax debts are not dischargeable. Payroll taxes, penalties for fraud, or tax debts that arise from tax returns that are not filed can not be eliminated in bankruptcy.
Tax and Bankruptcy
The debtor is required to file a tax return even if they plan to file for bankruptcy. The court requires the debtor to provide a copy of their most recent tax return. Once the bankruptcy petition has been filed, the trustee is responsible for filing income tax returns for the bankruptcy estate. After the bankruptcy case has been dismissed, any remaining assets in the estate are returned to the debtor, without any tax consequences.
If you are struggling with debt, there is a good chance you owe money in taxes. Unfortunately, tax debt is one of the trickiest things to deal with in bankruptcy. There is no simple answer to what happens to tax debt in bankruptcy, but there is a good chance you will be stuck with it no matter what you do. Luckily, an experienced lawyer can help you explore your options and find solutions.
At the Chandler law offices of Thompson Law Firm, we are dedicated to helping people get debt relief solutions. Whether tax debt is your sole concern or it is just part of a larger debt problem, we will help an experienced bankruptcy attorney Christy Thompson has helped people with all kinds of debt concerns find relief.
Discharging Tax Debts in Arizona
A discharge is a permanent court order indicating that discharged creditors are forbidden by the bankruptcy court to pursue collection activities against a debtor in connection with the debtor's personal liability. However, this does not extend to debts that were not discharged.
Unfortunately, most tax debts are not dischargeable. Much like student loans, child support and alimony, you are stuck paying tax debts no matter what action you take in bankruptcy court. This is the case for most federal, state and county taxes.
Contact Us for More Tax Debt Information
Just because you probably have to pay off your tax debt does not mean there are no solutions available to you, at our Chandler law offices, we help people across Arizona come up with debt relief plans. Every step helps. Call 800-584-1803 or contact us online for a free initial consultation regarding your tax debt.
